Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

PRIVATE BUSINESS

SHEFFIELD ASSAY OFFICE BILL

Considered; to be read the Third time.

Oral Answers to Questions — HEALTH

Health Appointments Systems

Mr. Milburn: To ask the Secretary of State for Health if she will make a statement on the health appointments systems.

The Minister for Health (Mr. Gerald Malone): The Government's aim is to ensure that the national health service continues to benefit from the appointment of the best possible people with a wide range of skills to serve as chairmen and non-executive directors of health authorities and trusts.

Mr. Milburn: Is the Minister aware that the system for appointing people to serve on health authorities and trusts is now widely discredited? Will he agree with the following three simple steps to open up the health appointment system? First, will he publish a full list of those nominated; secondly, will he make clear the selection criteria that Ministers use; and, thirdly, will he itemise, as for magistrates, the party political affiliations of those chosen to serve? Or does the Minister continue to believe that jobs for the boys and jobs for the girls are more important than public accountability in the national health service?

Mr. Malone: The system has certainly been extremely unfairly impugned by the hon. Gentleman and members of his party. The system is open and accountable. Measures are being put in hand to advertise the non-executive posts more widely to attract a wider range of people, with all the business skills and talents and other necessary skills in the community. If the hon. Gentleman wishes to improve matters, perhaps he will submit to the Nolan committee the disgraceful letter from Labour's national executive committee that instructs members of the Labour party who serve in non-executive capacities to report back to Walworth road. That is where the problem lies.

Mr. Devlin: Will my hon. Friend congratulate some of the well-known Labour supporters in the north of England, such as Brian Hanson, who serve on national health service trusts and do quite a good job and who disagree with the contentions of the hon. Member for Darlington (Mr. Milburn) on the health service but

agree with the British Medical Association, which says that it is not the time for further major organisational upheaval?

Mr. Malone: Yes, I endorse my hon. Friend's comments. In fact, I would go further and say that the vast majority of all those, from whichever party, who serve in non-executive capacities do a first-class job. They are taking the health service forward and deserve the greatest congratulation on the voluntary service that they provide.

National Health Service Reorganisations

Mr. Mackinlay: To ask the Secretary of State for Health if she will set out, by year, the reorganisations of the national health service that have taken place since 1979.

The Secretary of State for Health (Mrs. Virginia Bottomley): Major legislative changes were made in 1980, 1984 and 1990, as a result of which 2.5 million more patients are treated in hospital every year and the number of coronary bypass and cataract operations has more than doubled. The number of patients waiting more than a year for treatment is a quarter of the size that it was. I promise the House even more improvements following the publication of our new patients charter tomorrow.

Mr. Mackinlay: Have not Tory Governments reorganised the management structure of the health service on at least nine occasions since 1979? Is not it like painting the Forth bridge, except that the painting of that is normally completed before it is started again'? Will the Secretary of State reflect on the enormous cost to the public purse of those bogus reorganisations, which have sapped morale, lost expertise and meant that people who are dedicated to the national health service have not been able to care for patients?

Mrs. Bottomley: The hon. Gentleman should address his remarks to his own spokesman, or possibly to his party leader. We are not entirely sure how health policy is approved in his party; perhaps Richard Rosser, the transport worker who chairs the hon. Gentleman's policy committee, approves it. Our changes have much improved the efficiency of the service and have increased the quantity and quality of care. It is the hon. Gentleman's party that is threatening upheaval and turmoil and to undo all the good achieved by health service workers in recent years.

Mrs. Roe: Will my right hon. Friend confirm that the Government believe that the process of national health service reorganisation is now drawing to a close and that it will be her priority to create stability, under which staff can realise the full potential of the new system? Is that not in stark contrast with Labour's proposals, which threaten to tear the NHS up by its roots, thus inflicting massive damage on staff and patients? Does that not show in whose hands the NHS is really safe?

Mrs. Bottomley: I entirely endorse my hon. Friend's points. Health service staff have worked hard to achieve a quality of care that is now being observed by independent commentators and around the world. The recent Organisation for Economic Co-operation and


Development report was an independent commentary on the success of our reforms. The Labour party, however, is trying to appease its left wing to buy out clause IV and to give the health service to the unions at a cost of £1 billion, which will do nothing for patients. The Labour party will not get away with that and the Socialist Health Association is already condemning it for its cynical approach.

Mr. Rooker: Will the Secretary of State explain how the constant reorganisations have helped my constituent, 88-year-old Frances Grew, who, on Sunday afternoon went into Good Hope hospital in Sutton Coldfield, waited five hours for a bed and, at 9 pm, was admitted to the maternity ward, where she remains today? How have we reached such a sorry state where an 88-year-old lady has to be admitted to a maternity ward to obtain treatment?

Mrs. Bottomley: Of course there will be times when things go wrong, and they should be investigated, but Labour's approach is always scaremongering, divisiveness and appeasing the unions. The hon. Gentleman failed to say that, in the west midlands in the past five years, the number of hours for which junior doctors are contracted has fallen by 20 hours, that five years ago there were 8,000 people on the two-year waiting list and that west midlands will meet the nine-month target by next year. Health achievements in the west midlands in the past five years are truly remarkable, but they all stand in jeopardy because of the policies of the Labour party.

General Practitioner Targets

Mr. Bellingham: To ask the Secretary of State for Health what proportion of general practitioners met their targets for immunisation and cancer screening (a) on the introduction of the general practitioner contract and (b) on the latest date for which figures are available; and if she will make a statement.

Mr. Malone: In 1990, 89 per cent. of general practitioners met targets for childhood immunisation and 86 per cent. for cancer screening. By April 1993, this had increased to 96 per cent. meeting childhood immunisation targets and 98 per cent. meeting cancer screening targets. This is an excellent achievement by family doctors, who are leading the way in improving the health of their patients.

Mr. Bellingham: Does my hon. Friend the Minister agree that those figures are a tribute to the GP contract? Will he join me in congratulating doctors in west Norfolk who, under the contract, are delivering a superb service to their patients? As Labour voted against the contract, is it not time Labour gave doctors an apology?

Mr. Malone: When Labour Members are apologising, perhaps they will point out the fact that, in my hon. Friend's constituency, 100 per cent. of GPs are reaching the higher targets for childhood immunisation and cancer screening. That is an amazing achievement, particularly as we were told by the Labour party and the general medical services committee when we embarked on this exercise that it would be impossible to achieve. The exercise has exceeded all expectations.

Mr. Flynn: While the Government are congratulating themselves on the mounting number of drugs that are

being prescribed, will they consider the submission from the victims of Septrin support group, which claims that 100 people have been killed by that drug and that thousands of others have suffered side effects? Will the Government make a sensible investigation into Septrin, or are they entirely in the control and pockets of the pharmaceutical industry?

Mr. Malone: No, the hon. Gentleman is, first, off the point and, secondly, entirely wrong. The consistent evaluation of drugs and their efficacy is not directly a day-to-day responsibility of Ministers. I am not congratulating myself or my ministerial colleagues on achieving those immunisation targets but recording my thanks and congratulations to practitioners and others involved in the service on those excellent results and on completing a measles vaccination campaign in record time over the winter period.

Community Care (Funding)

Mr. Nigel Griffiths: To ask the Secretary of State for Health when she last met representatives of the Association of County Councils to discuss the funding of community care; and if she will make a statement.

The Parliamentary Under-Secretary of State for Health (Mr. John Bowis): I meet representatives of the Association of County Councils formally and informally on a variety of occasions, the last occasion having been last Monday. We discuss a variety of matters relating to English social services on such occasions.

Mr. Griffiths: Why does not the Minister listen to Lady Farrington, who chairs the association and who presented a list of 20 areas, from Bedfordshire to Wiltshire, that are chronically underfunded for community care? Does he not realise that the murder of Georgina Robinson showed what a failure community care has been and that it is time not for the new mental health Bill that the Minister promises but for a new Minister, a new Secretary of State and a new Government?

Mr. Bowis: I welcome the hon. and Scottish Member to questions about English health, but I shall not be able to do so for much longer if his party has its way. I certainly listen to the ACC. I also listen to the Audit Commission when it tells me that community care has got off to a good start, that some authorities have got into a financial muddle because of inadequate financial control and that others are playing politics with community care, spending money on administration, refusing to use the independent sector and then reducing services to people in need.

Sir George Gardiner: Will my hon. Friend comment on the situation in Surrey county council—a hung council—which appears to have run out of funds to support social services for the remainder of this year?

Mr. Bowis: My hon. Friend is right. I have seen the letter from Surrey county council to independent homes, which states:
This must seem a strange letter to receive.
I endorse that comment. In its letter to councillors, it confesses that everyone took their eye off the budget ball, but, in the end, there were no excuses for Surrey social services.
I recall that, last year, Surrey social services received £93 million. For community and social services this year, the figure is £108 million. We have announced £121 million for next year, 17 per cent. extra this year, and another 11 per cent. next year. It is beyond my understanding how a county could get into such a muddle when it knew the figures for the current year in December 1993.

Mr. Hinchliffe: From his contacts with local authorities and discussions about community care, is the Minister aware of the extent to which councils are increasingly being asked to take on community care people who should be in hospital? Is he aware of unconscious people who are on drips being referred to councils for community care? Is he aware of people who are in a coma being referred to councils for community care? Is not the root of the crisis in community care the operation of the Government's market in health?

Mr. Bowis: I am aware that, this year, we are putting £4.6 billion into community care. I am aware that, for the coming year, as we have already announced, the allocation will be more than £5.1 billion. The hon. Gentleman will be aware that we have issued draft guidance and will shortly issue full guidance on continuing care, which will reinforce the message to the NHS that it has a responsibility for continuing medical and health care for people in need. I look forward to hearing the hon. Gentleman's policies and those of the right hon. Member for Derby, South (Mrs. Beckett) on community care and on continuing care—whether they agree with the views of the Commission on Social Justice, whether they have not yet made up their minds, or whether they are still waiting for Alastair Campbell to tell them.

Mr. Sims: Is not the hon. Member for Edinburgh, South (Mr. Griffiths) confusing two different matters? Care in the community for the mentally ill has been running for a number of years. It is showing some shortcomings, as in some places provision in the community is not adequate, but there is also evidence that clinicians are releasing into the community some mentally ill patients with a history of violence who should not be released. The community care policy, which has been running only a relatively short time, gives local authorities responsibility for the elderly, children and the disabled. That policy has been generously funded and it is working well in most parts of the country, but some local authorities are financially incompetent.

Mr. Bowis: My hon. Friend is right on both counts. The amount of resources for mental health is not being criticised, although the use of the Mental Health Act 1983 is criticised on occasions. Implementation of the Government's widely welcomed and accepted policy is sometimes inadequate. That was the message of the Blom-Cooper inquiry, which called for a tightening of the Mental Health Act with regard to severely mentally ill people. That is precisely why, before too long, we shall introduce a Bill to implement supervised discharge.

"Working for Patients"

Mrs. Mahon: To ask the Secretary of State for Health if she will make a statement on the document "Working for Patients".

Mrs. Virginia Bottomley: "Working for Patients" has been a great success. Some 96 per cent. of NHS hospitals are now trusts, more than half of all eligible practices are now fundholding and, most important, the quality and quantity of patient care continue to improve.

Mrs. Mahon: Five years after the grossly misnamed "Working for Patients" document, we have the longest-ever waiting lists and the obscenity of people dying because there are no intensive care beds and services for the mentally ill are dangerously underprovided. Will the right hon. Lady make a brief statement on the document and its consequences, perhaps saying, "The Government got it wrong and my team and I resign"?

Mrs. Bottomley: The hon. Lady will know that the length of time that people wait has just about halved, that every day we treat 3,000 more patients than we did at the time of "Working for Patients" and that the quality, and quantity of care have improved. We have increased the number of hip operations by 24 per cent., of cataract operations by 44 per cent. and of cardiac operations by 66 per cent. Those are dramatic improvements in the health service.
When considering how to spend the extra £1.3 billion that we are putting into the NHS this year, health authorities will want to be sure that they have the balance right between intensive care, mental health services and reducing waiting times. They are pleased to have Conservatives in government as we provide extra resources for the health service—unlike the Labour party, which cut expenditure on the health service in real terms.

Mr. Patrick Thompson: As "Working for Patients" has led directly to reduced bureaucracy and improved care for patients, especially in my constituency of Norwich, North, will my right hon. Friend join me in welcoming today's announcement in Norwich of approval for the outline business plan for the new district general hospital? It is good news. Way back in the past, there was a history of delay and endless prevarication. Under the new reforms, we now have approval, so will my right hon. Friend ensure that we get the new hospital as quickly as possible?

Mrs. Bottomley: Most certainly; I can do just that. Because we have been determined to improve the efficiency and effectiveness of the health service, it is possible for patients to have a dividend. There can be a massive capital programme with a new project starting every eight days. That is what the Conservative party delivers. All that the Labour party delivers is the wish list of the trade unions, at a price of £1 billion, achieving nothing for patients and nothing for the NHS. It is just trying to keep the left wing happy. Of course, the greatest waiting list scandal in the NHS is the waiting list for a Labour party policy on the health service.

"The Health of the Nation"

Dr. Wright: To ask the Secretary of State for Health if she will make a statement on "The Health of the Nation" objectives and progress.

Mrs. Virginia Bottomley: "The Health of the Nation" continues to enjoy the enthusiastic support of the clinical professions within the national health service and of outside bodies such as the World Health Organisation. Where latest information is available, it shows that for 19 out of the 23 targets we are moving in the right direction.

Dr. Wright: Does the right hon. Lady agree that the growing inequality in health between the deprived and the affluent parts of this country is making a nonsense of many of the key targets of "The Health of the Nation"? In particular, does she accept that the appalling rise in suicide rates among young men in deprived areas, which is an indictment of us all, is a direct result of the lack of jobs and the lack of hope? When will the Government understand that we can build a decent health service only if we build a decent society first?

Mrs. Bottomley: May I respond to the hon. Gentleman's comments about the increase in suicide? It is true that suicides have increased in virtually all comparable countries. More people take their own lives than are killed on roads. Our figures are about the average for similar countries. That is why it is such an important target in "The Health of the Nation" strategy. The hon. Gentleman is entirely misguided in that he does not recognise that the changed funding arrangements for the health service, and the distinction between purchasers and providers, mean that we can better focus on many of the difficulties that some areas face. I find it extraordinary that he supports a party that opposed the GP contract, which introduced for the first time deprivation payments for GPs in poorer regions. Perinatal and mortality rates have improved for all income groups and all social classes.

Mr. Streeter: Does my right hon. Friend believe it to be in the interests of patients for NHS hospitals to be put under the control of local Labour councillors and Labour party hacks—as the Labour party proposes—which even Bevan would not have contemplated?

Mrs. Bottomley: My hon. Friend is right. Of course the battle that Herbert Morrison and Nye Bevan fought in 1948 is the debate now being fought in the Labour party. That shows its forward-thinking approach to health policies. It turns the clock back not to 1979, but to 1948 and it reopens the battle of that time. We must have a health service that is responsive to patients, that works with GPs and that focuses on health outcomes. The Government are achieving that, which is why we are delivering results that have exceeded even our own expectations at the time of the first patients charter.

Mr. Alex Carlile: Does the right hon. Lady agree that ensuring that men are as aware of health risks and health needs as women is a legitimate objective of an NHS strategy? Has she noted the alarming rate of deaths caused by prostatic cancer, which exceeds the rate of deaths by cervical cancer? Does she agree that the time has come to

ask GPs to screen their male patients, as many screen their female patients, so that men's health can be greatly improved?

Mrs. Bottomley: I am pleased that the hon. and learned Gentleman implicitly recognises the success of the cancer screening programmes. Cervical and breast cancer screening programmes have been extremely effective, with many women being screened. They build on the investment in primary care and show the importance in GP services of having, when possible, effective screening processes at primary care level. We shall consider the hon. and learned Gentleman's proposition carefully.

NHS Trusts

Sir Peter Fry: To ask the Secretary of State for Health how the number of patients treated on the NHS has increased since the establishment of NHS trusts.

The Parliamentary Under-Secretary of State for Health (Mr. Tom Sackville): The number of acute patients admitted to hospital between 1991, the year before the first trusts were established, and 1994 increased by 18 per cent. That represents an additional 3,000 patients treated each day.

Sir Peter Fry: I thank my hon. Friend for that reply. Will he confirm that in the Oxford-Anglian region, my own region, some 25 per cent. more patients have been treated by trusts and that some 50 per cent. more day cases have been treated? Does he, like me, find it difficult to understand why the Labour party wishes to sweep away trusts and thus deny the benefits of their success to our constituents?

Mr. Sackville: I agree with my hon. Friend. I congratulate his region on its exceptional performance. I agree that, under the sort of shower that the Labour party would bring to the health service, there is no way in which the number of patients treated could increase.

Mr. Pike: If the figures are so good, why do so many people find it necessary to pay for their first appointment to see a consultant, in the knowledge that, if they do not do so, they will have to wait months?

Mr. Sackville: Waiting times have come down. All districts are obliged to publish the length of the waiting list of each consultant for out-patient appointments. Waiting times for both in-patient and out-patient appointments are coming down. I should have thought that the Labour party would congratulate the NHS on that.

Dame Jill Knight: Does my hon. Friend agree that not only the figures should be noted? The fact is that more patients have been treated with infinitely more complicated and expensive operations, treatments and drugs than ever before in our history and that thousands of people are alive today who would have died from their condition even five or 10 years ago.

Mr. Sackville: My hon. Friend describes the successes of today's NHS in her own way.

Mrs. Beckett: Does the Minister recognise that the figures that he gives are largely meaningless as they include so many elements of double counting because they count treatments and not patients? If the Minister really wants to look at patient episodes in that way, is he


aware of the substantial increase in the number of private patients treated in national health service hospitals? Does he recognise that most British people think that NHS patients should have priority in NHS hospitals?

Mr. Sackville: I am aware that the right hon. Lady is only just learning her job. She accuses us of double counting. The figures are now collected on the basis of finished consultant episodes because that is the best way to measure NHS activity. The difference between that figure and the old way of counting based on deaths and discharges is about 3 per cent. and all comparative figures reflect that.

NHS Expenditure

Sir David Knox: To ask the Secretary of State for Health what percentage of gross domestic product was spent on the national health service in the most recent year for which figures are available; and what was the percentage in 1978.

Mr. Malone: National health service spending in the United Kingdom as a whole has risen from 4.7 per cent. of gross domestic product in 1978–79 to an estimated 5.8 per cent. in 1994–95.

Sir David Knox: Does my hon. Friend agree that those figures show up the different priorities that Conservative and Labour Governments have for the national health service?

Mr. Malone: Yes, I agree with my hon. Friend. Not only that—they underpin the fact that there is increased activity and not merely increased spending. It is the improvement in patient health care that really counts for people in this country.

Ms Jowell: In view of the proportion of gross domestic product spent on the national health service and the importance of securing proper value for money for patients, does the Minister for Health accept that more rigorous monitoring is needed of the way in which NHS consultants who also undertake private practice divide their time between their NHS responsibilities and their private patients?

Mr. Malone: I am delighted that the hon. Lady now seems to support the Government's policy for ensuring that the management of clinicians should be devolved to a local level so that all these matters can be examined. I welcome her to this side. I had hoped that an Opposition Front-Bench Member might stand up and say what a Labour Government would spend as a proportion of gross domestic product, but on the vital matter raised by my hon. Friend the Member for Staffordshire, Moorlands (Sir D. Knox) there is yet again a resounding silence from the Opposition Front Bench.

Mr. Nicholas Winterton: I warmly welcome the figures, which clearly show the Government's commitment to the national health service. Does my hon. Friend accept that some high-tech sophisticated operations cannot be carried out in hospitals within the national health service in the United Kingdom? I draw my hon. Friend's attention to the case of Miss Alicia McCluckie in my constituency, who needed to go to New York for an operation to remove a brain tumour. Will my hon. Friend introduce a system to provide people in this country with a procedure whereby they can bring pressure to bear on

the authorities to provide facilities for operations abroad when such treatment is not available in the United Kingdom?

Mr. Malone: e people come to Britain to take advantage of medical services here than travel abroad. However, it is true that some procedures are available abroad which have not been clinically proven in this country.

Mr. Nicholas Brown: In 1978, Britain spent 8 per cent. less than the Organisation for Economic Co-operation and Development average on public health care. By 1991, the position had changed to 12 per cent. below the OECD average. Before I answer the Minister's questions, perhaps he will tell the House why the relative position has regressed under Conservative Government.

Mr. Malone: The hon. Gentleman said, "Before I answer the Minister's questions," but he is clearly not going to do so. Perhaps we shall get a commitment once the answer has been cleared, although I had thought that the hon. Gentleman was one of the Front-Bench spokesmen cleared to speak for his party.
On the OECD league tables, the hon. Gentleman is forgetting entirely that one is not comparing health systems that are the same. Some bring in expenditure from social services while others have an entirely different structure. He should study the OECD recommendations, which state that the British health care system is probably the most effective in the European Union and, more importantly, that we allocate funds throughout the country in a far fairer, more flexible and more sophisticated way than any other health service in Europe in order to meet deprivation and need.

Mr. Hayes: Does my hon. Friend agree that the most civilised part of Essex—Harlow—is delighted with the increased spending on the health service? We are delighted with our new NHS trust, our new computerised axial tomography scanner and our new magnetic resonance imaging scanner, and also with the £10 million spent by the Government on our accident and emergency facilities.

Madam Speaker: And I shall be delighted if the hon. Gentleman will ask a question.

Mr. Hayes: Thank you for that advice, Madam Speaker. Does my hon. Friend agree with me?

Mr. Malone: I had always thought that my hon. Friend was the most sophisticated and delightful part of Essex, but that opinion is perhaps not shared across the Floor of the House. I thoroughly agree with him. I was in Essex last week, opening a community health trust centre in Purfleet, which shows how excellent health care is in that county and how it is improving.

Care Beds (Elderly)

Ms Coffey: To ask the Secretary of State for Health what assessment she has made of the present level of provision of NHS continuing care beds for the elderly; and if she will make a statement.

Mr. Bowis: District health authorities are responsible for making such assessment locally and for ensuring adequate provision.

Ms Coffey: Does the Minister agree that it is crucial to have national eligibility criteria for access to NHS


continuing care? It cannot be right for an elderly person in one part of the country to have to pay for health care which is free in another part of the country. How does the Minister intend to ensure that health authorities fulfil their financial obligations under the National Health Service Act 1977 and that the elderly have equal access to NHS care, irrespective of where they live?

Mr. Bowis: The answer lies partly in the continued generous funding for the national health service under this Government—£32 billion for England this year—partly in the fact that about 40 per cent. of spending on hospital and community health services goes on the 16 per cent. of people who are 65 and over and partly in the guidance that we are issuing to the health service to ensure that it continues to keep responsibility for the continuing health needs of the elderly and that it reviews, and if necessary re-provides, provision in that area. The hon. Lady must not ask me to take the place of the doctors, who ultimately decide the clinical needs of patients.

Mr. Garnier: If my hon. Friend wants to assess the provision of national health service care, would he like to visit the Coventry Road and St. Luke's hospitals in Market Harborough? Were he to do so, he would find fine examples of the success of the Government's policies and the good sense, management and operation of the Fosse health trust.

Mr. Bowis: I am sure that that is the case and that if I visited those hospitals I would see precisely what my hon. Friend describes—good quality care for people, irrespective of age, provided by the national health service within hospitals and the community.

Blood Donation

Ms Eagle: To ask the Secretary of State for Health what extra level of financing has been agreed by her Department for an advertising campaign by the National Blood Authority to encourage blood donation.

Mr. Sackville: National publicity to retain and recruit donors for the national blood service is funded by the Department of Health—in 1993–94, to the extent of £1.6 million. The budget for 1994–95 is £1.2 million. Smaller-scale local publicity is generally funded and organised by the National Blood Authority.

Ms Eagle: Does the Minister not realise that recent changes, which have threatened blood transfusion centres with closure, and the evidence that the National Blood Authority is selling blood products, are fatally undermining the contract with donors who freely give their blood? Does he not realise that a Government who believe in putting a price on everything, while knowing the value of nothing and flogging off everything that cannot be nailed down, will ruin our national blood service?

Mr. Sackville: The only thing which might have undermined blood donation has been the disgraceful campaign by the hon. Lady and her colleagues to frighten donors, but it has failed to do so. Blood stocks are now at about 15,000 units, and it is a tribute to our loyal donors that they have ignored the rubbish that they have heard from the hon. Lady and her colleagues.

Mr. Nigel Evans: My hon. Friend will be aware that I receive many letters from donors who fear that they may

not have the opportunity that they currently enjoy to donate their blood at travelling units because of changes to the regional centres. Will he assure the House that, despite changes that may be made to regional centres, people will still be able to enjoy the benefits of attending those mobile units?

Mr. Sackville: Only a tiny proportion of blood collection takes place at those centres. The reorganisation is taking place because there is too much capacity in processing and testing. The savings that can be made will be available to improve donor support and recruitment of donors. I give that assurance to my hon. Friend.

Mr. Illsley: Does the Minister accept that there is a crisis within the national blood service? He has just quoted a figure of 15,000 units of blood. At yesterday's date—16—January—blood stock levels were 11,939 units, which is below both the figure that he quoted and the service's target figure of 20,000 units. The public are now unwilling to donate blood because the reorganisation proposals are unpopular and because of the increasing commercialisation of the national blood service. Will the Minister now reverse those reorganisation proposals?

Mr. Sackville: The latest figure happens to be 14,500 units. For the hon. Gentleman to talk about a crisis in the national blood service is highly irresponsible, as it is designed to frighten donors. Of all that has been said by the Opposition, that is the most disgraceful. It has nothing to do with the NHS but is about making political points.

Epilepsy

Mrs. Gillan: To ask the Secretary of State for Health what funding has been provided for research into epilepsy in the past financial year.

Mr. Bowis: The main channel is through the Medical Research Council, which spent a total of £472,000 during 1993–94 on research into epilepsy, an increase of 40 per cent. over the previous year.

Mrs. Gillan: I congratulate my hon. Friend on the increase of 40 per cent. in spending on research into epilepsy. Is he aware that the world's first scanner dedicated to treatment and research on epilepsy will be opened this spring at the National Society for Epilepsy in Chalfont St. Peter in my constituency? The society is delighted that the Secretary of State is to visit the scanner to see its progress. Will my hon. Friend take this opportunity to thank the private donors who have raised £1.75 million to build that scanner, which will bring much help, treatment and relief to the many sufferers of epilepsy?

Mr. Bowis: I am happy to join my hon. Friend in the tribute that she pays to both the National Society for Epilepsy and the donors who have made the scanner possible. My right hon. Friend the Secretary of State is looking forward to opening it next week. I confirm the Government's real commitment to epilepsy. In recent months, not only did I open the Centre for Epilepsy and launch the Institute for Epileptology, but I have recently asked our officials to consider and come forward with plans for new initiatives in that area.

Mr. Tipping: Will the Minister ensure that research into epilepsy leads to action on behalf of people who have


epilepsy and that people who want to work in the national health service are not refused jobs because they are epileptic?

Mr. Bowis: The hon. Gentleman makes an important point. The work, including research, which we and the whole medical profession have been doing, is into educating general practitioners and the public. That includes employers, so that they accept people with epilepsy. It is to help people to live with the problem and also to encourage research. All those matters are on our agenda, which I am delighted to share with the hon. Gentleman.

Hospital Services (Northumberland)

Mr. Beith: To ask the Secretary of State for Health if she will visit Northumberland to discuss the financing of hospital services in the area.

Mr. Sackville: My right hon. Friend the Secretary of State enjoyed her visit to Northumberland on 2 August 1994, but has no plans to visit again in the near future. I, however, would be happy to respond to an invitation from the right hon. Member for Berwick-upon-Tweed (Mr. Beith).

Mr. Beith: Will the Minister follow up that kind offer and bring the Prime Minister with him? People in Northumberland are extremely baffled as to why, since the Secretary of State's visit, the Cheviot and Wansbeck hospital trust has lost more than £1 million in its first year of operation. Can the Minister give a guarantee to back up the undertaking given by the regional chairman to the effect that, whatever the cause of that enormous cash shortfall, it will not impair hospital services in Berwick, Alnwick or Rothbury? Will the Minister take steps to ensure that that does not happen?

Mr. Sackville: I understand that last week the right hon. Gentleman and other parliamentary colleagues had a constructive meeting with the regional chairman at which they received that very assurance.

Oral Answers to Questions — PRIME MINISTER

Engagements

Mr. Winnick: To ask the Prime Minister if he will list his official engagements for Tuesday 17 January.

The Prime Minister (Mr. John Major): This morning, I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today.

Mr. Winnick: Why has the Prime Minister refused to allow the Nolan committee to look into the way in which political parties are funded? Is it because that committee would soon discover the underhand and shabby way in which the Tory party collects a lot of its money and how knighthoods and peerages are given to many of those who make the largest donations to the Tory party? Surely it is disgraceful that the Conservative party should carry on in that manner in this day and age.

The Prime Minister: There is a disgrace in party funding. The hon. Gentleman is right—yes, indeed. The disgrace in party funding is the Labour party's dependence on trade unions, which buy direct influence

over that party's votes. We have seen that many times in the past and we shall see it again with clause IV, as the old, unreconstructed Labour party comes to the rescue of the new Labour party.

Mr. Brooke: Does my right hon. Friend recall that after the country gave up paying danegeld the policy was resumed under King Ethelred the Unready?

The Prime Minister: My right hon. Friend always adds a touch of erudition to these occasions. I suspect that he has in mind the precise point that I touched upon just a moment ago—he who pays the piper calls the tune, and we know who pays the Labour party.

Mr. Blair: On 10 January, the Prime Minister said at Prime Minister's Question Time that he was as committed to maintaining the existing through-ticketing service on British Rail as I was. Tomorrow the House will have a chance to vote on a motion opposing any reduction in through ticketing. Will the Prime Minister therefore support that motion?

The Prime Minister: The right hon. Gentleman knows what the Rail Regulator said last week. The regulator made the position perfectly clear: he is now considering the responses to his own consultation document. He said:
Privatisation and restructuring of the railways are intended to improve service to customers and stimulate innovation. In looking at any new proposals to replace British Rail's current arrangements, I shall want to be satisfied that they are likely to achieve those objectives.
I agree entirely and I shall wait to see what proposals the regulator makes.

Mr. Blair: But the question is: what is the Prime Minister's own position? The Secretary of State for Transport said that any reduction in existing through-ticketing services was unacceptable. Will that therefore be the Government's position in the consultation, which the regulator has said may mean a significant reduction in service? Will the Government tell the regulator that that would be unacceptable? And if the regulator ignores the Prime Minister's view, what will the right hon. Gentleman do?

The Prime Minister: I set out the Government's position precisely, just a moment ago. If the right hon. Gentleman had listened to my first answer, he might not have asked his second question. If the right hon. Gentleman were, time after time, to hear the Government say precisely what would be the outcome of consultations before the consultation was completed, and when the consultation was being undertaken by a regulator, he would accuse us of abusing the position of the regulator and not listening to the consultation.
I repeat for the right hon. Gentleman: I shall want to be satisfied that the outcome of the consultation generally improves the service that is available to people on through ticketing and other matters. That is the purpose of privatisation. I am not satisfied at present with the service that British Rail has offered for many years, and I intend to see it improved. That is what privatisation will achieve.

Mr. Blair: Is it not the case, therefore, that last week the Prime Minister was saying that he was committed to maintaining the existing service and that now he will not say that he is committed to doing so?[Interruption.] He has just been given two chances to do so, and he has not said it.
Is not this the problem with privatisation? When the public see £700 million being spent up to now on privatisation, cuts in timetable, cuts in services, and now a possible cut in through ticketing, is it any wonder that they do not want British Rail broken up and sold off but want it maintained as a publicly owned, publicly accountable transport service?

The Prime Minister: The right hon. Gentleman has an unsuspected sense of humour. I had not imagined, after the turn and turn about in his transport policy on British Rail in the past few days, that he would have had the brass neck to suggest to us, incorrectly, that we had changed the position that we have taken on through ticketing.
Our position is precisely as we stated it at the beginning. We have made it perfectly clear what we expect at the end of the process. Unlike the right hon. Gentleman, we have not changed our policy on Friday, Saturday, Sunday and Monday, as he has done through a range of his own spokesmen on the Front Bench, past and present, and his press spokesman.

Mr. Hicks: In view of the disappointing performances by our English test cricketers in recent years and the contribution that cricket makes to our national society, does my right hon. Friend agree that there is an urgent need to establish a cricket academy in this country and that it is a suitable project for consideration for funding by the Millennium Commission?

The Prime Minister: On the latter point, there is no reason why, if a suitable project were put forward, it could not be considered by the Millennium Commission or, indeed, I would think, in terms of the resources front the national lottery, by the Sports Council. As regards the general proposition, my hon. Friend knows my concern about team sports generally and my desire that they should be given much more importance in the school curriculum. We intend to pursue that.

Mr. Darling: To ask the Prime Minister if he will list his official engagements for Tuesday 17 January.

The Prime Minister: I refer the hon. Gentleman to the reply I gave some moments ago.

Mr. Darling: The Prime Minister will recall his great triumph last year when he installed Monsieur Santer as President of the European Commission. In the light of what Mr. Santer had to say today on the subject of European integration, does the Prime Minister still believe that Monsieur Santer is the right man for the right job at the right time, or is the right hon. Gentleman guilty of yet another gross error of judgment?

The Prime Minister: I wonder whether the hon. Gentleman has read all 34 pages of Mr. Santer's speech. [Interruption.] It is obvious from the hon. Gentleman's face that he has read the Press Association extract and nothing more. As for the best men for the job, we shall judge the new Commission by its performance and by its efficiency in carrying out the tasks assigned to it. As I have said before and I repeat now, I believe that the high tide of federalism in Europe is past, and I believe that that will be apparent in the forthcoming intergovernmental conference.

Mr. Marland: Is my right hon. Friend aware that in 1974 the Conservative Government banned the export of

live animals for slaughter but the Labour Government of 1975 lifted the ban? How does my right hon. Friend think that that squares with the squawking that we hear from Opposition Members, given that the Opposition agriculture spokesman was a member of the Government who lifted that ban?

The Prime Minister: The straight answer to my hon. Friend is that I was not aware of the duplicity of the Opposition's position on that subject—although I suppose that in view of their position on so many other matters, I would have been wise to look back and see what their agriculture spokesman had done in the past. Surely the right approach for all people concerned about the welfare of animals is to raise standards of animal welfare across the European Union, which is what we are seeking to do. We lead from the front in negotiations on the subject and we intend to continue to do so to seek the best standards of animal welfare, not just in the United Kingdom where they are already better than anywhere else in the European Union, but right across the European Union.

Mr. Chidgey: To ask the Prime Minister if he will list his official engagements for Tuesday 17 January.

The Prime Minister: I refer the hon. Member to the answer I gave some moments ago.

Mr. Chidgey: Is the Prime Minister aware that a recent survey by Eagle Star showed that there were more burglaries committed in Britain than in any other country in Europe? If so, will he now admit that the failure of his policies to tackle crime have placed this country not at the heart of Europe but on the far margins of lawlessness and disorder?

The Prime Minister: I sometimes wonder whether there is any piece of silliness that the Liberal party will not adopt to make a party point. Everyone in the House is concerned to see crime cut. The crime statistics, for the first time in not just two or three years but 30 to 40 years, are now beginning to fall. I have seen no support from the hon. Gentleman or his colleagues on the Liberal Benches for the vast range of measures that we have taken in recent years to combat and punish crime. When the hon. Gentleman comes into the Lobby to support the fight against crime I will listen to what he has to say at Prime Minister's Question Time on the subject of crime.

Mr. Bellingham: To ask the Prime Minister if he will list his official engagements for Tuesday 17 January.

The Prime Minister: I refer my hon. Friend to the answer I gave some moments ago.

Mr. Bellingham: Will my right hon. Friend the Prime Minister find time today to consider West Midlands Travel which, under Labour, was a sleepy nationalised industry but which, under the Tories, has been a privatised success story and is about to be floated on the stock market? Is it not good news that all the employees will receive free shares and the directors, who include the former Labour transport spokesman, the hon. Member for West Bromwich, East (Mr. Snape), will make large profits on their share options?

The Prime Minister: I suppose that that is another indication this week that it is best to be a former Labour transport spokesman than a current Labour transport spokesman. I welcome the flotation; I hope that it is a


great success and that the hon. Member for West Bromwich, East (Mr. Snape) does well out of it. The privatisation of the bus services has proved immensely successful for bus service users and will continue to do so—[Interruption.] Labour Members who shout "Rubbish" had better take up the matter with the hon. Member for West Bromwich, East.

Mr. Barnes: Why are the Government involved in a massive exercise to kill off the Civil Rights (Disabled Persons) Bill by introducing their own limited and restricted measure in the House ahead of discussions on that measure? The provision is required by the 10 per cent. of people in this country who suffer from disabilities and has massive support inside and outside the House.

The Prime Minister: I suggest that the hon. Gentleman reads the Bill that he is seeking to dismiss. That "limited" Bill carries rights for disabled people when they are unfairly discriminated against in employment. It gives them the right to complain to an industrial tribunal when they feel that unlawful discrimination has occurred. It requires those providing goods and services to ensure that they are accessible and it provides for a conciliation service, a national disability council and measures to combat discrimination in transport and education sectors. If the hon. Gentleman thinks that that is a limited Bill, I think that he has limited capacity to understand what is in the Government's legislation.

Sir Peter Tapsell: To ask the Prime Minister if he will list his official engagements for Tuesday 17 January.

The Prime Minister: I refer my hon. Friend to the answer I gave some moments ago.

Sir Peter Tapsell: Is my right hon. Friend aware how greatly he heartened most people in this country when he

stated on television on 8 January that at the intergovernmental conference in 1996 he would not agree to any constitutional change which impacted on the sovereignty of this Parliament? Does that not contrast—with striking historical force—with the renewed admission by the Leader of the Opposition in Brussels on 10 January that a Labour Government would agree to further reductions in British parliamentary and national sovereignty?

The Prime Minister: I repeat that I believe that it would be a departure to make further constitutional changes. I was quite clear about that in my policy when I set it out a week or so ago.
I am rather surprised by what the Leader of the Opposition had to say about handing more powers to the European Parliament in view of the low opinion that he expressed recently of some Members of that Parliament.

Oral Answers to Questions — BILL PRESENTED

HOME RULE (SCOTLAND)

Mr. Menzies Campbell, supported by Mr. Paddy Ashdown, Mr. Malcolm Bruce, Sir Russell Johnston, Mr. Charles Kennedy, Mr. Robert Maclennan, Sir David Steel, Mr. James Wallace, Mr. Alex Carlile, Mr. Archy Kirkwood and Mrs. Ray Michie, presented a Bill to establish and entrench a Scottish Parliament elected by a system of proportional representation, with revenue-raising powers, to assume legislative authority on all matters of public policy relating to Scotland, under reservation of matters relating to defence, international and macro-economic affairs which shall remain the preserve of the United Kingdom Parliament; to provide for changes in the constitution and functions of certain public bodies; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon 27 January, and to be printed. [Bill 34.]

Points of Order

Mr. Joseph Ashton: On a point of order, Madam Speaker. Is it not a long-established practice in the House that, when a Member raises an issue affecting another Member's constituency, he writes to tell that Member that he intends to raise it? As the town of West Bromwich also forms part of your constituency, do you not agree that it would have been common courtesy for the hon. Member for Norfolk, North-West (Mr. Bellingham) to inform my hon. Friend the Member for West Bromwich, East (Mr. Snape), in order to give him the right of reply?

Madam Speaker: I make it quite clear that I am the Member for West Bromwich, West—the better part of West Bromwich. In all seriousness, I received a similar request yesterday which I am looking at and I hope to make a statement to the House fairly soon about those matters.

Mr. D. N. Campbell-Savours: On a point of order, Madam Speaker. You will know that the Nolan committee is carrying out an inquiry into conduct in public life and that many hon. Members are giving evidence to that committee. They wish to give evidence in some detail about the relationship between lobbying companies and Ministers of the Crown, and over a period, I have tabled a number of questions on that issue.
Before Christmas, I tabled a question to the President of the Board of Trade asking on how many occasions he or his departmental officials had met representatives of Messrs Ian Greer Associates. I was told that I could not be given that answer, for a reason that you will understand, Madam Speaker: Ministers regularly cite disproportionate cost as a reason for not answering questions.
The problem is that I know—as you do, Madam Speaker—that Nolan himself is in a position to secure that information from Government. Yet I, as a Member of Parliament, am not allowed to seek the information because Ministers will not answer questions. As the whole country is observing what is going on in the Nolan committee, will you express the view on this occasion that Ministers should answer questions, not on the detail of meetings but on when they met lobbying companies, thereby enabling Members of Parliament to speak responsibly about those matters when they appear before Nolan? If we are not in a position to do so, we shall find it difficult to substantiate our claim to the Nolan committee that it should consider the matter in some detail.

Mr. Peter Bottomley: Further to that point of order, Madam Speaker. If a question has been answered

with the response that to obtain the information would cost too much, and later on that information is supplied to some other body, surely it would be a courtesy for the Government Department concerned to write to the hon. Member saying that the information is now available.

Madam Speaker: The hon. Gentleman has made a wise suggestion in that respect.
The hon. Member for Workington (Mr. Campbell-Savours) began by saying that I know that hon. Members are giving evidence to the Nolan committee. I do not know who those Members are, but he has raised a serious point with me. Perhaps I can look at the responses that he has received and see whether I can be helpful in that respect.

Mr. Roger Berry: On a point of order, Madam Speaker. In his reply to a question, the Prime Minister said that the Government's Disability Discrimination Bill contained provisions relating to education and transport. As that is not the case, would you consider inviting the Prime Minister to apologise for again misleading the House?

Madam Speaker: That is not a matter for me, but concerns political exchanges across the Floor of the House. The proceedings were perfectly in order. If the hon. Gentleman wishes to pursue the matter, he can find opportunities to do so, either with the Ministers concerned or with the Prime Minister himself.

Ms Angela Eagle: Following the event at Downing street yesterday, which was clearly party political, and especially given the present financial condition of the Conservative party, I wonder whether Parliament can take a view on whether 10 Downing street is to be used for party political fund-raising events at any time in future.

Madam Speaker: There has been no breach of our procedures here, which are a matter for me. Proceedings which take place outside the House are not my concern.

STATUTORY INSTRUMENTS, &C

Motion made, and Question put forthwith pursuant to Standing Order No. 101(3) (Standing Committees on Statutory Instruments, &amp;c.),

UNLICENSED TELEVISION SERVICES

That the Broadcasting (Unlicensed Television Services) Exemption Order 1994 (S.I., 1994, No. 3172) be referred to a Standing Committee on Statutory Instruments, &c.—[Dr. Liam Fox.]

Question agreed to.

Building Societies (Joint Account Holders)

Mr. Douglas French: I beg to move,
That leave be given to bring in a Bill to secure the rights of second-named account holders in Building Society joint accounts; and for connected purposes.
The Bill addresses the problem which arises whenever there is a takeover or merger by a building society which involves a bonus payout to members. It applies currently in the case of the takeover of the Cheltenham and Gloucester building society by Lloyd's bank. It will apply in respect of the proposed merger of the Halifax building society and the Leeds Permanent, and any others that may follow.
The combined effect of schedule 2(7) and section 100(9) of the Building Societies Act 1986, is that any distribution of bonus to savers who have investment accounts—that is, members who hold shares in the society—can be made only to a sole account holder or to the first-named person of a joint account, and in both cases only to those who have invested continuously for two years.
The requirement to have invested continuously for two years is a very wise provision, because it seeks to reward loyalty for long-term saving and not to reward those who open accounts in anticipation of a takeover and a windfall cash distribution.
The restriction to first-named joint account holders, however, discriminates against categories of saver who ought to be entitled to benefit. The most unfairly treated category of all is widows who have had a joint account with their husbands and whose husbands die during the qualifying period.
The husband's name may be deleted from the existing account, or the balance may be transferred to a new account in the widow's name only. Either way, the counting of the two-year qualifying period has to begin all over again. It makes no difference how many years previously the wife has contributed to the account: she gets no credit for it, because it is deemed to be in her husband's name.
The problem is well illustrated by my constituent Mrs. Wiltshire, of 52 Mayfield drive, Hucclecote, Gloucester. As long ago as 1964, she opened an account with the Cheltenham and Gloucester in her first married name of Mrs. Wellington. In 1966, her first husband having died, she remarried, and her account was amended to the name of Mr. and Mrs. Wiltshire.
Sadly, Mr. Wiltshire died in 1993, and the account was transferred back to Mrs. Wiltshire's sole name. She is therefore a continuous saver of more than 30 years' standing, but she does not qualify for a cash distribution under the C and G takeover, because she was not the first named account holder for two years prior to the qualifying date—in this case, 31 December 1994.
The same problem arises with newly marrieds. A single woman who has a building society investment account may on marriage choose to redesignate the account jointly in the name of her new husband and herself. By doing so, she loses the rights that may have accrued to her when the account was in her own name. Her new husband must

begin the two-year qualifying period in his name alone. A similar disadvantage can arise in cases of divorce, when a woman must reopen an account in her name alone.
Those examples show that the 1986 Act unwittingly enshrined a degree of sex discrimination. It is virtually always the woman, whether a widow or newly wed, who suffers, because the normal convention in the English language is to designate an account Mr. and Mrs. To open an account using Mrs. and Mr. would be thought rather odd. Consequently, the woman is invariably the second-named account holder and cannot accrue any rights in relation to a two-year qualifying period while she remains the second-named person.
That problem has been much in the news recently, but it is not new. It was identified as early as 1988, when the Abbey National building society decided to convert to plc status. In making share allocations, the Abbey National found that it was precluded from conferring any benefit on second-named account holders. Six years later, that problem remains unresolved.
My hon. Friend the Minister of State, Treasury is well aware of the problem, and I pay tribute to him for the tune and trouble he has taken to consider possible solutions. He is currently engaged in a full review of building societies' powers, and hopes to present a range of measures in due course. The trouble is, as my hon. Friend pointed out in his letter to me of 14 December 1994, that he sees little possibility of bringing forward any legislation before 1996—and even then, the 1986 Act's takeover provisions are not his prime concern. My Bill singles out for earlier treatment one point that must surely be perceived as an injustice by whoever considers it.
The Bill does not attempt to tackle every related problem. For example, individuals who switch from a deposit account to a share account during the qualifying period also exclude themselves from any entitlement—but that is a more complex matter, which falls outside the Bill's scope.
In my opinion, the flaw in the 1986 Act was to assume that eligibility for bonus payments must be based exclusively on voting rights. Second and subsequent joint account holders were not given voting rights, because members could then have exercised multiple votes simply by adding extra names to joint accounts. That is why only one vote attaches to one account. However, exclusion from voting need not in every case be accompanied by exclusion from bonus entitlement. One bonus payout should attach to each account where either the first named account holder or a second or subsequent account holder meets the two-year qualifying period for continuous saving.
If my Bill becomes law, it will be for the Cheltenham and Gloucester to decide whether to take advantage of the legislation to benefit its members. A vote on the takeover's current terms is due at the end of March, and the two-year qualifying period ended on 31 December 1994. It would be open to the C and G to make the operative date later. It has already postponed it once, and could do so again. I hope that the society will so decide. In any event, the Bill protects against a similar problem arising in future takeovers.
The Bill does not attempt to change the two-year qualifying period or to give joint account holders more than their fair share or to alter voting rights. All it does, by two small amendments to the Building Societies Act,


is give credit for the savings record of the second-named account holder, and by so doing, fairness and justice to thousands of people. I commend it to the House.

Question put and agreed to.

Bill ordered to be brought in by Mr. Douglas French, Mr. Matthew Carrington, Mr. Geoffrey Clifton-Brown, Mr. Simon Coombs, Mr. Quentin Davies, Mr. John Greenway, Mr. Nick Hawkins, Mr. Roger Knapman, Mr. Peter Luff, Mr. Paul Marland, Mr. John Townend and Mr. Nigel Waterson.

BUILDING SOCIETIES (JOINT ACCOUNT HOLDERS)

Mr. Douglas French accordingly presented a Bill to secure the rights of second-named account holders in Building Society joint accounts; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 3 February, and to be printed. [Bill 35.]

Orders of the Day — Finance Bill

[Relevant document: The Third Report from the Treasury and Civil Service Committee on The 1994 Budget (House of Commons Paper No. 79).]

Order for Second Reading read.

The Chief Secretary to the Treasury (Mr. Jonathan Aitken): I beg to move, That the Bill be now read a Second time.
All Finance Bills are vigorously debated, and I am sure that this Bill will be no exception, but I shall begin by commending to the House a procedural innovation affecting this year's debates, which may well improve the quality of our proceedings. As my right hon. Friend the Leader of the House announced in his business statement on Thursday, it would be proposed that the Standing Committee on this Bill would not be required to sit long into the evening or, indeed, into the night. In accordance with the spirit of the Jopling reforms, it is proposed that the Committee will sit in the mornings and afternoons, thus ending more than a century of a tradition of nocturnal sittings.
I take this chance to pay tribute to both sides of the usual channels and also to thank the Opposition for their co-operation in making the reform possible. It is a sensible modernisation of our antediluvian procedures, and it has been generally welcomed not only by hon. Members from all parties, but by the many outside bodies which like to attend the debates in Committee, including representatives of the professions, the unions, industry and the press. Apart from a few incorrigible Westminster night owls, almost everyone will be grateful for this new procedural move in favour of daylight debating time.
As the House knows, the Finance Bill is the annual legislation which enables the Government to complete their virtuous circle of sound public finances by aligning what goes out in public spending with what comes in in taxation. I am not at all sure that the Opposition understand that such a circle exists or that it needs to be virtuous, or, indeed, that there needs to be any sort of alignment between taxation, expenditure and borrowing.
The problem is not what the Opposition say. The deputy leader of the Labour party was flattering his team of Treasury spokesmen when he ticked them off recently in the middle of their shambolic disarray over VAT on education with the rebuke:
I think we have been so long in opposition that we tend to be a little bit loose with our language.
Not for the first time, the deputy leader of the Labour party got it wrong. The real problem which we are likely to face in the course of debate on this Bill is not Labour's loose language, or even its loose purse-strings on expensive policy commitments such as new bureaucracies to handle the break-up of Britain, new quangos and the job-destroying minimum wage legislation. No, the real problem that the House and the country have with the Opposition on economic policy is the problem of their evasive silences.
Up to now, the shadow Treasury spokesmen have performed a passable imitation of four Trappist monks in a Harold Pinter play. Whenever they are asked


fundamental questions on vital economic policies—such as, do they think that the present levels of borrowing are too high or too low, do they think that the present levels of public expenditure are too high or too low, would they put taxes up or down, or at what figure will they set the minimum weekly wage that they have undertaken to introduce—consistently, answer comes there none. All we get are these uncomfortable Pinteresque silences, which are even being written up and noticed by the critics.
For example, this week's Economist published a perceptive article headlined "Labour's Profit Phobia" in which it asked:
Is Labour really committed to a dynamic modern market economy?
The report continued:
But no one knows. There is considerable disagreement over economic policy within the Labour party, even among those who seem Mr. Blair's keenest supporters … there remain huge differences of opinion, for example, about the residual role of public ownership, about public spending and public borrowing and, most important, about profits and rewards.
I am delighted that The Economist and other parts of the media are waking up to Labour's yawning credibility gap on these issues. Conservative Members know where we stand on these important matters because one of the cardinal features of this Finance Bill is that it demonstrates our commitment to strengthening Britain's dynamic modern market economy. I shall refer to specific clauses that are dedicated to that purpose later in my speech.
However, let me focus for a moment on the phrase "dynamic modern market economy" because that phrase, and the commitment to it, came from the lips of no less a personage than the Leader of the Opposition during his ill-fated speech in Brussels on 10 January.

Mr. Andrew Smith: Ill-fated?

Mr. Aitken: I hear a muttering of dissent from the hon. Member for Oxford, East (Mr. Smith). I called that speech "ill-fated" because, as has been well reported, the Leader of the Opposition's speech was torpedoed that same morning by the Guardian advertisement which attacked Labour's modernisation plans. That advertisement was placed by the majority group of 32 Labour MEPs who were later castigated by the Leader of the Opposition, with true brotherly charm, as "infantile incompetents".
Where was the shadow Chancellor of the Exchequer in that divisive rumpus created by Labour's "infantile incompetents"? I have a fascinating revelation to make. The House will be interested to know that the source of the hostile Guardian advertisement was an office with a most intriguing address. The address was published in the advertisement, and it was 25 Church street, Inverkeithing, Fife. Guess whose office that was; guess whose office the anti-Blairite MEPs were using as their base from which to attack the Leader of the Opposition? The astonishing fact is that the anti-Blairite MEPs were using the shadow Chancellor's constituency office as their launch pad for that hostile Guardian advertisement.
Well, well, well; talk about getting wires crossed; talk about political schizophrenia and the right hand not knowing what the left hand is doing. We have always known that the Labour party is a divided church. Now we know that, even in the shadow Chancellor's own office, Labour is divided at 25 Church street.
I cannot think how the Opposition are going to manage their party, in respect of the Finance Bill, with that kind of unity. Imagine the scene when a new Labour well-wisher visits the office of the shadow Chancellor to offer advice on this admirable piece of legislation which promotes a dynamic modern market economy—after all, that is what the Leader of the Opposition wants—and what happens? He comes face to face with the old Labour's infantile incompetents tendency and the brothers who do not even approve of a market economy, and certainly do not want to see it modernised, dynamised or even endogenous-zone-ised.
My advice to the warring parties in "Blair Wars" is that they should at least compromise by declaring the Dunfermline, East constituency office a demilitarised zone. Joking apart—[HON. MEMBERS: "Oh."] Well, we like to have light and shade in such speeches. My colleagues are enjoying themselves. I am sorry that Opposition Members are so discomfited.

Sir Peter Tapsell: While we are on the subject of joking, is my right hon. Friend certain that The Guardian had not stolen the writing paper?

Mr. Aitken: I am tempted to avoid those matters, as they are probably sub judice.
As I was saying, those schizophrenic splits and silences within the Opposition are quite rightly going to come under intense scrutiny during the debates on this Bill, as the whole purpose of our legislation is to consolidate and strengthen Britain's growing economic success story, underpinned as it is by the Government's resolute commitment to sound public finances.

Mr. William O'Brien: Will the Minister address the situation that is facing the charity organisations, whereby the excess which they must pay on VAT is in the region of £300 million a year, which is 10 per cent. above the income they receive? Does the right hon. Gentleman say that that is how the Government are building the economy, or does he agree that charities should be given special consideration?

Mr. Aitken: Charities have long been given special consideration under our taxation law, and they will continue to be so. The hon. Gentleman might be referring to a wholly erroneous report in one of the Sunday newspapers, which was completely misleading about that aspect of the Bill. It is such a detailed point that we had better keep it for discussion in Committee, but I assure the hon. Gentleman that he is going down a wrong road. The Government are all in favour of some special concessions remaining for the taxation of charities.

Mr. Alan Howarth: Does my right hon. Friend accept, however, that, notwithstanding the very valuable incentives that the Government have provided to charitable giving, charities face a burden of more than £300 million on irrecoverable VAT? Does he agree that, given that the Government are increasingly looking to charities to play a part in the provision of public services, it is important that the tax regime reflects coherent and consistent encouragement for charities? Therefore, before the measure is considered in Committee, will my right hon. Friend undertake to consider scope for a VAT refund scheme for charities?

Mr. Aitken: I know of my hon. Friend's great interest in and support for charities. I assure him that there is no


sinister hidden agenda in the Bill somehow to do down charities in relation to tax. It is worth mentioning that charities already receive £1.4 billion of tax relief each year. Therefore, any criticism of anything in the Bill—I am sure that such matters will be debated fully in Committee—must be seen against that background. My hon. Friend's point must be seen in the clear perspective of the £1.4 billion of tax reliefs, but we will certainly consider it in Committee.

Dame Elaine Kellett-Bowman: Is my right hon. Friend aware of the grave danger of a Labour Government—if by some mischance Labour formed the Government of the day—removing charity status from schools, and of the problems that that would pose to Church schools and Church colleges, particularly those whose buildings were donated many centuries ago?

Mr. Aitken: I am grateful to my hon. Friend for making that point. However, one of the temporary, at least, productive signs of the power struggle between old Labour and new Labour is that the sword of Damocles of VAT on Church schools and others—

Dame Elaine Kellett-Bowman: Charities.

Mr. Aitken: It is all part of the package which was announced by the Labour education spokesman, and which was then smartly repudiated. He had that agenda in mind, but, if I can follow the gyrations and acrobatics in Labour policy making, it has been repudiated. However, that question is not for me, but for the Opposition. I hope that my hon. Friend's fears are misplaced.

Mr. John Sykes: Perhaps, in view of what my right hon. Friend has said, my hon. Friend the Member for Lancaster (Dame E. Kellett-Bowman) should direct her inquiries to Inverkeithing rather than to Walworth road on this matter.

Mr. Aitken: Perhaps Church street looks after Church schools—we will see.
Sound public finances are the foundation of the Bill. I remind the House that, in his Budget statement, my right hon. and learned Friend the Chancellor announced that we will reduce public expenditure by £28 billion over the next three years. Moreover, by a combination of encouraging economic growth and keeping such firm control on public expenditure, the Government will halve the public sector borrowing requirement between last year and next year from £45 billion to £22 billion. We project that we will nearly halve the PSBR again in 1996–97.
Opposition Members apparently do not approve of that, but my hon. Friends certainly do, and so do Britain's companies, Britain's inward investors and the international financial markets. The widespread approval of our policy of sound public finances and the decisions that flow from it have produced some remarkable results. I hope that all hon. Members will welcome the fact that the economy has performed way ahead of expectations over the past year.
The British economy has now been growing for two and a half years. Growth last year was more than 4 per cent., the fastest in the European Union, and exporters have led the way. Exports are up 13 per cent. on a year ago, and are at record levels. Some forecasters are making

clear predictions that Britain's balance of payments may be in surplus this year and next. Certainly the House should welcome the fact that the current account is in surplus for the first time since 1987. After decades of decline, the United Kingdom's share of world trade in manufactured goods stabilised in the mid-1980s, and we are now selling more goods and services abroad than ever before.
Just one example of the remarkable success being achieved by British business is Japan—a nation to which we extend our heartfelt sympathies for the tragic earthquake it suffered today. On the general picture of British-Japanese business relations, many people would consider it remarkable that it appears that in recent months Britain has moved into current account surplus with Japan. That is surely a success story of which it is worth being proud.
In manufacturing, output is up by 5 per cent.; productivity is up by 6 per cent.—the fastest rise since April 1989—and unit wage costs are falling. Recent CBI surveys show that the manufacturing sector is expected to grow strongly.
It is also becoming widely recognised that Britain is one of the best places in the world to do business. That is certainly well recognised by our competitor countries, even if not by the Labour party. The United Kingdom has attracted the lion's share of inward investment to Europe, with more than 40 per cent. of United States and Japanese investment in the European Union coming here.
After America, Britain is now the world's second most popular inward investment destination. In 1993–94, almost 100,000 jobs were created or safeguarded by inward investment. Since 1988, overseas investors have backed Britain to the tune of £4 billion with projects such as the Nissan factory, which created more than 4,000 jobs in County Durham; Honda, which created 2,000 jobs in Swindon; Motorola, which created 250 jobs in East Kilbride; and Samsung, which created more than 3,000 jobs in Wynyard. Those developments are a real vote of confidence in the British economy and in British workers.

Mr. Alex Salmond: Before Budget No.1, the Scottish media told us that Scottish Office Ministers had made representations to the Treasury team to put off the second tranche of VAT on fuel. Those representations were obviously ignored by the Treasury team but subsequently accepted by the House. Before Budget No. 2, did Scottish Office Ministers make representations to put off the increases on fuel and whisky—two further anti-Scottish measures? Were they ignored again, or did they not bother to make any representations?

Mr. Aitken: The hon. Gentleman knows perfectly well that Scottish Ministers fight their corner admirably, in Whitehall and everywhere else. Inevitably, such representations and communications with Ministers are not published; they are all part of the collegiate discussion. I assure the hon. Gentleman that the Scottish Ministers fought their corner admirably at all stages of the Budget discussions.
The successes that I have listed have been due to two main keys. The first was the supply side reforms introduced by the Government over several years. The second, which is important for creating jobs and remaining competitive in world markets, is keeping a tight lid on inflation. Inflation is low—indeed, it is lower than


the European Union average. It has now been below 3 per cent. for 14 months running, something not seen since 1961, when the Leader of the Opposition was still receiving his private school education at a school free of VAT.
Against that background of low inflation, the present economic environment of a good performance by exporters, solid growth by industry, encouraging trends in investment and prudent stewardship of finances by Government, will definitely be strengthened by the Bill.

Mr. Malcolm Chisholm: Does the right hon. Gentleman think that it is an encouraging trend that the level of business investment last year was only 2 per cent.? Has he taken heed of what the Select Committee said in its report this week—that it does not really accept the Treasury forecast of an 11 per cent. increase in business investment in the year ahead? Is that not a problem area for the economy? Will not the position be made worse by the interest rate rises, in view of the capacity shortages in the economy'?

Mr. Aitken: The hon. Gentleman is in danger of being a doom-monger, and I shall tell him why. First, the latest data show that investment in plant and machinery in the third quarter of 1994 was up 5.3 per cent. on a year ago. Therefore, the latest figures suggest that the rate of investment is accelerating. The Treasury is forecasting a 10.75 per cent. growth in business investment in 1995, but that is a rather lower figure than the CBI forecast, which is that manufacturing investment in 1995 will rise by 11.25 per cent.
If the hon. Gentleman is not convinced by either of those forecasts, perhaps he would care to take a backward look and be reminded that, during a number of recent years, annual business investment growth has been running at more than 10 per cent. For example, it was 10.9 per cent. in 1984; 13.3 per cent. in 1987; 14.9 per cent. in 1988; and 11.3 per cent. in 1989. As the hon. Gentleman may realise, I was looking forward to an intervention on the pessimistic view of investment. A much more optimistic view exists. It should, and I hope will, prevail on the basis of the facts that I have given.

Mr. Thomas McAvoy: I am grateful to the Chief Secretary to the Treasury for giving way. He has been generous with his time, and I am grateful to him for that.
The right hon. Gentleman mentioned investment projects into the United Kingdom, which of course includes Scotland, and the Government's so-called prudent stewardship of public finance. In his list of investment successes, he notably failed to mention Health Care International private hospital in Clydebank. The Secretary of State for Scotland poured millions of pounds into that failed project, yet he is still promising a further £4 million of public money to any private investor who steps in to try to rescue that project. How does that square with the Government's image of their stewardship of public finance?

Mr. Aitken: The very nature of investments is that they are sometimes risks. Not every investment works out as a tremendous success. Apparently, another foreign investor is thinking of investing in that hospital, which was a risk that was clearly misjudged at the time. Nevertheless, it is

probably a good hospital building, and I hope that, under new ownership and new management, it will still provide a good service to the patients of Scotland.
I do not want to get into too much detail on any one investment project. I was giving the broad picture, which is extremely encouraging. I was anxious to turn to the contents of the Bill, which I can best summarise by concentrating on two major themes that emphasise the purpose of the Government's tax policies. The first is the encouragement of enterprise in employment, and the second, clearly linked to the first, is deregulation and simplification of our taxation system.
As my right hon. and learned Friend the Chancellor of the Exchequer made clear in his Budget, the Government are especially keen to help small businesses to grow and to flourish. They represent the very lifeblood of Britain's commerce. It is a notable statistic that 96 per cent. of all firms employ fewer than 20 people, and that there are now 1 million more small businesses than there were when Labour left office in 1979. That represents a 50 per cent. increase in small businesses.
There has also been an excellent increase in self-employment, which has increased by 35 per cent. in the past 10 years. Those trends are steadily improving, as National Westminster bank's latest review of small business trends, published last week, clearly emphasises.
As a Government, we try to listen carefully to what small businesses tell us. We respond to their priority requests to help on matters such as cutting the cost of taking on new staff, easing the cost of business rates, raising new capital for expansion, cutting red tape and simplifying the tax system. All those requests have met a positive response in the Budget and the Bill.
For example, we have cut the cost of taking on new staff by our measures to reduce each of the lower rates of employer's national insurance contributions by 0.6 per cent. That will cut the cost of employing anyone who earns less than £205 a week. We have also announced a one-year holiday for employers' national insurance charges when an employer recruits as a new member of staff someone who has been unemployed for more than a year. On average, that will save employers more than £300 for each person they take on, at a total benefit to employers of £45 million a year.
Those two measures will boost output and help with the reduction of unemployment, which has fallen by more than 500,000 since its peak in December 1992, and which in recent months has been falling at the rate of more than 1,000 people coming off the unemployment register per day.

Sir Mark Lennox-Boyd: Before my right hon. Friend leaves the subject of small businesses, will he comment on the excise duty on video games, which affects several small businesses in my constituency? Many small business operators who have been to see me fully recognise that video games should fall within the tax net, but the proposals in the Bill will kill the goose that lays the golden egg, and prevent the operation of many video machines, which in a constituency such as Morecambe and Lunesdale provides many jobs for my constituents.

Mr. Aitken: From a constituency point of view, I have some sympathy with my hon. Friend's point because amusement machines seem to be concentrated not only in


coastal locations such as Morecambe and Lunesdale but in Thanet. I have received some vigorous representations on the matter—[Interruption.] So, I can hear, have my right hon. Friend the Member for Worthing (Sir T. Higgins) and my hon. Friend the Member for Scarborough (Mr. Sykes). We shall have some interesting debates on the matter. It is not a new tax but an extension of an existing tax. We have broadened the boundaries. The amusement machine licence duty will broaden the tax base and protect long-term yield in an evolving market. Amusement machines without prizes will be taxed at a lower rate of duty. Payment by instalments will be available to ease cash flow. We will probably have a good debate in Committee on what I realise is for many of my hon. Friends a sensitive constituency issue.

Mr. Nick Hawkins: Will my right hon. Friend give way?

Mr. Aitken: For the last time.

Mr. Hawkins: Will my right hon. Friend confirm that, on the sensitive issue raised by my hon. Friend the Member for Morecambe and Lunesdale (Sir M. Lennox-Boyd), he and his right hon. and hon. Friends in the Treasury are prepared to consider representations by the trade body, the British Amusement Catering Trades Association, with which I am due to see my hon. Friend the Paymaster General with some of my hon. Friends next week?

Mr. Aitken: Yes. We will certainly listen carefully to representations from BACTA. I know that an appointment has already been made with my hon. Friend the Paymaster General. I thank my hon. Friend the Member for Blackpool, South (Mr. Hawkins) for his help in organising the meeting, which is of some importance. We will listen carefully to the representations made.

Mrs. Anne Campbell: Will the Minister give way?

Mr. Aitken: I have just said that I have taken enough interventions. I must make progress.
We recognise that revaluation for business rates can cause uncertainty by imposing sudden additional costs on businesses. So we have eased that problem in the Budget by introducing a new transitional business rate relief scheme, at a cost of £605 million in 1995–96.
On the question of helping growing small businesses to raise capital, I draw the attention of the House to clauses 64 to 67 and schedules 14 to 16 of the Bill, which launch a new venture capital trust scheme to encourage the flow of new investment into small and growing businesses.

Mrs. Campbell: Is the Minister aware that, for many people in small businesses, the main means of raising finance is the equity on their home? One of the difficulties that many businesses face at present is that the further fall in house prices in the past year has meant that more of them than ever before have negative equity. Does he have any specific proposals to deal with that?

Mr. Aitken: I was dealing with helping businesses to raise capital. I was telling the House that we were introducing a new method of raising capital for small businesses. The venture capital scheme to which I referred

will make it unnecessary for business people in future to mortgage parts of the equity on their home, which has always been a risky thing to do unless one was very confident of the business.
The venture capital trust scheme has been designed to fill the gap in the range of financing options available to growing companies. The VCTs will generate risk capital in the unquoted companies sector, while giving investors the security of a quoted pool vehicle. They are expected to lead to a substantial increase in investment. We estimate that a total of up to £2.5 billion could be raised by VCTs over the next three years. They will provide more funds where they are most needed: among dynamic, innovative and growing businesses.
I now turn to the easing of burdens on small businesses and tax simplification measures. I highlight the Budget reform which raised by one third the threshold below which small employers can account for PAYE and national insurance contributions quarterly rather than monthly. That means that 60 per cent. of all employers will now be able to make their PAYE payments quarterly.
I remind the House that we have introduced other deregulatory measures to cut red tape, including increasing the VAT registration threshold, which at the new level of £46,000 is now easily the highest in the European Union.
As for simplifying the tax system, the unwelcome size and weight of the Finance Bill highlights the strange paradox that simplification can be a complicated business, at least in terms of legislation. Some 70 pages of the Bill are devoted to a major reform and simplification of the tax system. Self-assessment will be of particular help to those affected—some 4 million self-employed taxpayers and an equivalent number of business taxpayers—by the relatively complicated tax returns.
Self-assessment is desirable because it removes unnecessary duplication of work. It helps taxpayers to pay the right bills at the right time. It leaves taxpayers with fewer clerical burdens, so that they have more time and energy to devote to their primary objective of creating wealth.
Self-assessment saves public money, simplifies collection arrangements and enables the Inland Revenue to pursue dishonest taxpayers more effectively. It is true that this year's self-assessment measures will place some new burdens on employers, but those are being kept to the minimum. The overall impact of self-assessment will be significantly to reduce business compliance costs. I hope that those measures will be supported by hon. Members on both sides of the House.
I hope that the Opposition will notice that this Finance Bill, like many of its predecessors, contains more than a dozen clauses designed to plug loopholes that may offer opportunities for tax avoidance. I hope that the hon. Member for Dunfermline, East (Mr. Brown) will be pleased by that fact, because in recent months he seems to have developed almost an unhealthy obsession with tax loopholes. He squawks and sound-bites on the subject with so much moral indignation that there are times when he brings to mind Disraeli's caustic comment on Gladstone:
I don't mind him having the ace of trumps up his sleeve but I do wish he wouldn't claim that God had put it there.
My less celestial, but similar, complaint about the hon. Member for Dunfermline, East is not that he wants to close tax loopholes but that he will keep pretending that


he and the Labour party have a divine right to claim it as a political card of their invention. That is complete nonsense.
The truth of the matter is that, in recent years, the Government have introduced more than 50 legislative measures to combat tax avoidance. This Finance Bill continues that regular process, and includes loophole-closing measures estimated to raise more than £1.5 billion in the next three years. I hope that that commitment knocks on the head the notion that the Inland Revenue or the Government are soft on unnecessary tax avoidance. We are not soft on tax avoidance, and a dozen clauses in the Bill are there to prove it.
Finally, on the two "clause fours", the Bill contains a clause 4 that deals with the denaturing of alcohol. That process has a remarkably similar bearing to what the new Islington elitists among the Opposition are up to—denaturing the Labour party. That denaturing of the old Labour party, over clause IV, is an esoteric exercise, which seems to be generating more heat than light, and is about as relevant to Britain's modern economy as a 19th-century ecclesiastical dispute about hymns, ancient and modern.
The Islington public relations spin doctors, however, are only too delighted to use the clause IV squabble as a cynical diversionary tactic to confuse the electorate with the illusion that something important is happening within the official Opposition.
The House and the country will not judge the Opposition and the Finance Bill by whether the natural Labour party or the denatured Labour party is making the most noise—that is Tweedledum or Tweedledee territory. The battle over whose new rattle is best may well continue with a vengeance every weekend in the Dunfermline office to which I referred, where the loyal shadow Chancellor has to battle it out with the disloyal leader of the Labour Members of the European Parliament who placed that advertisement in The Guardian, but that is all "Alice in Wonderland" stuff. It is absolutely irrelevant to Britain's dynamic modern market economy.
During the course of this Finance Bill, we want to find out whether the Opposition will break their Trappist vows and evasive silences on taxation, public expenditure, borrowing and the level of the planned minimum wage. If they do not do so, they will be exposed not merely as the denatured party, but as the discredited and devalued party that does not dare to reveal its true financial and economic policies, even during the intense scrutiny of a Finance Bill debate.
By contrast, our Finance Bill will put into effect the key measures in my right hon. and learned Friend's Budget. It will strengthen the excellent economic performance that we are seeing in Britain today; it will help to encourage our enterprise culture, to simplify and deregulate the tax system and to clamp down on real tax avoidance. The Bill is full of sensible and prudent measures to sustain growth in a low-inflation, high-exporting Britain, and I commend it to the House.

Mr. Andrew Smith: First, I join the Chief Secretary in welcoming the innovation agreed by both sides of the House, of morning sittings of the Finance Bill Standing Committee. I assure him that that means that the Bill will have more scrutiny by the Opposition,

not less. I shall not join him, however, in devoting my speech to matters other than the Finance Bill. It spoke volumes for what the Government have put in the Finance Bill that the Chief Secretary spoke for 20 full minutes before referring to the Bill. Even then, the remainder of what he said was spattered with the sparsest references to it. He spoke for eight minutes on the Bill and 24 or 25 minutes on other matters.
The Bill contains 348 pages, but does nothing to address the country's needs. It is as disappointing, damaging and divisive as the Budgets from which it results. Throughout its proceedings, the Opposition will contrast our approach of fairness and opportunity with the Government's addiction to privilege, vested interests and unfair taxation. The Bill is also rather a shambles, containing neither proposals to rescind the increase in VAT on fuel, nor measures to implement the mini-Budget of 8 December. We know that the Government will bring those forward by way of amendments later, but what a way to carry on—major Budget changes spatchcocked into the Bill at the last minute, when the public, interested parties and hon. Members will have less than adequate time to consider them and no opportunity to amend them in Committee.
The Bill will compound the Government's record of broken promises and incompetence. It will do no good to the vast majority of people and nothing to improve the position described by the vice-chairman of the Conservative party—no less—when he said in the Maples report:
the rich are getting richer on the backs of the rest, who are getting poorer.
That is the reality that people are experiencing, and it will get worse as living standards fall under the impact of the further tax increases that will hit people this April and of the rise in housing costs, which the Bill would make worse, and as people are hit by the consequences of centrally imposed cuts in local council services.

Mr. Giles Brandreth: The hon. Gentleman has touched on tax increases. As it would be fruitless to ask him what tax increases he has in mind, will he concentrate his mind on public sector borrowing'.' Does he endorse the Government's aim of reducing the public sector borrowing requirement to £5 billion by 1997–98? What does he judge is the correct level of public borrowing in the term covered by the Bill?

Mr. Smith: We shall take no lectures from a party that not only broke all its election promises on tax, but built up record levels of public borrowing, for which the country will pay dear over the next few years.
Instead of dealing with people's worries and doing something about them, Conservative Members just claim that everything the Government do makes things better. They pump out propaganda that shows the same scrupulous regard for the truth as the promises that they made to cut taxes at the previous general election. We have the 100 facts from the chairman of the Conservative party, which I presume the Chief Secretary must have checked as they contain such wonders of wishful thinking as fact 27:
The PSBR is forecast to fall from £21.5 million in 1995/96"—
chance would be a fine thing—and the claim in fact 96 that spending on the Welsh language is "now over £7.5 billion." That will come as news to my hon. Friends in Wales.
Doubtless in the same spirit, the chairman said in his news release:
for Britain, good news is all about us, if only we care to look.
Once he has finished explaining that to his vice-chairman, Mr. Maples, who thinks that people are getting poorer, the right hon. Member for Richmond and Barnes (Mr. Hanley) may find time to explain to the country the fact that living standards are falling by 4 per cent. this year; this year, direct taxes on a typical family will go up by £6.44 a week; indirect taxes will go up by £2.72 a week; and interest on the national debt will be a staggering £36 billion more in the next five years compared with the past five years. With killer facts such as that, the Conservative party chairman has nothing to boast about. He should be apologising to people for broken promises and for how badly the Government have let Britain down.
Ministers should apologise today for bringing forward a Bill that does nothing for investment, jobs and fairness. In their news release on the publication of the Bill, the Government heralded venture capital trusts as
 a major theme of the Finance Bill".
They said that they would provide
vital extra funds for investment.
The Chief Secretary said in his speech that that would ensure that funds went where they were most needed. There is, however, no evidence to suggest that the proposal will create any new money for investment—there is every expectation that it will divert savings from other quarters.
It is revealing that the financial and investment press has focused rather more on the tax avoidance opportunities and rather less, indeed hardly at all, on new funds for investment. The magazine, Small Company Investor, for example, reports:
Our bet is that there will be an avalanche of lower-risk property-backed schemes taking money away from entrepreneurial small companies. Think again Chancellor.
I fear that that message will fall on stony ground and will be unseen by the Chancellor and his colleagues, because reading that magazine and criticisms of the Government's proposals in other publications prompted me to ask to which investment publications the Treasury subscribes. I received an interesting list, which included something called "Baking Technology", which I presume is used for cooking the books.
Given how often the Government make extravagant claims about the help that they have given to small businesses and bearing in mind the fact that more than 750,000 of them have gone bust in the past five years, one might have thought that the Government would subscribe to Small Company Investor. Between now and the Committee proceedings, the Government should make a wise investment in a subscription for that magazine and obtain some back copies of it. They would then discover that it contains headlines such as:
Life is just a bowl of tax cherries. Will you need to pay capital gains tax again? Maybe not.
There is no doubt that venture capital trusts are a massive tax break. They provide tax breaks when the money goes in through relief from income and capital gains tax; tax breaks when the money is in trusts when

dividend and capital gains are not taxed and tax relief when the money comes out with relief on the capital gains.
Property-backed companies, which are trading for tax purposes, fall within the Bill's provisions, which means that the Bill risks replicating the worst features of the business expansion scheme. There would be nothing to stop a venture capital trust being designed round the opportunities for a millionaire's tax shelters, such as that marketed by Johnson Fry Holdings, which offers the opportunity to shelter capital gains of up to £100,000 a year, with the indefinite benefit of the interest gained on the tax liability thereby deferred.
The Opposition do not believe that the stated purpose behind the investment schemes is all bad; we want to see investment encouraged. We have argued for particular encouragement for investment in research and development. Our concern, however, is that the schemes presented in the Bill offer legion opportunities for abuse. The Government will claim that they have created provisions to reduce those opportunities, but they have succeeded rather more in creating legislative complexity than they have in inhibiting avoidance. It would be a triumph of hope over experience to expect that things will not be worse than even I have described once the full ingenuity of the tax avoidance industry gets to work.
The same goes for the provisions to extend the enterprise investment scheme and roll-over relief. The memorable words of the December 1994 issue of "BESt Investment Tax Shelter Service"—another publication that I would commend to Ministers—were:
Another detail change (for which we had been lobbying) sees the much disliked 'property test' abolished for EIS and Re-investment Relief companies. This will have the effect of … reducing the costs of creating artificial structures to get around the old provisions.
There could be no clearer confirmation that the Government are opening up further opportunities for abuse of low-risk property-backed schemes, which even they had to recognise and reverse following their abuse in the business expansion scheme.
What is more, the tax avoidance culture for super-rich and very well-advised people makes a sickening contrast with the increases in tax bills—£800 extra a year—for a typical family, compared with 1992, when the Prime Minister promised tax cuts year on year. It is obvious, yet again, that, with the Government, there is one rule for the few and another rule for the many; one rule for a person with £100,000 of capital gains a year to shelter, and another for the waged or salaried employee, struggling to pay a mortgage and fearful of unemployment.

Mr. Tim Smith: The hon. Gentleman is missing one rather important point—that a lot of people who make equity investments lose a lot of money. The record showed that many people went into the BES for tax reasons and lost a great deal of money. As a considerable risk is involved, surely it is right that the Treasury should offer some tax incentives for people to take a risk. That is the important point, is it not?

Mr. Smith: It is a long time since I heard anything as extraordinary as the idea that the mass of ordinary taxpayers should subsidise wealthy people to put their money into schemes that are often safe, one-way bets without risk.
The Bill also threatens investment by its proposals on deep discount and qualifying index securities. Although we understand that the Government are thereby trying to prevent loans being structured with the sole intention of deferring or avoiding tax, we are worried about the serious, possibly unanticipated, effects that that would have, especially on non-profit-making organisations such as housing associations and universities.
Those organisations have found those instruments for borrowing especially advantageous because they have been available to them on more favourable terms. It would cause special difficulties for them if the goalposts were to be moved part of the way through the game, so that those organisations were now confronted by greater borrowing costs on existing loans. That could mean larger rents for housing association tenants and budget difficulties for universities—perhaps even for health trusts, if they also have used those instruments.
The Finance Bill changes would be especially onerous on institutions that had already incurred, before 29 November, considerable fees in preparing a qualifying index security for issue but had not yet issued the debt. The university of Portsmouth has been cited to me as an example, and I am sure that we shall need to discuss many others in the detailed proceedings on the Bill.
Options should be explored to avoid those difficulties. First, the taxation of existing arrangements on the same basis as was expected when the transaction was initially executed—which natural justice and fairness would dictate—has much to commend it. Secondly, tax benefits on future arrangements could be restricted to approved borrowers, such as the non-profit-making organisations, including housing associations and universities, to which I referred. Such options could deal with the potential injustice caused by the increased cost that many borrowers will bear because the Conservative Government propose to remove—in effect, retrospectively—tax incentives that the Conservatives themselves created in 1984 and 1989.
What I have just said about deep discount securities emphasises the importance of what I said earlier about venture capital trusts. The Government always appear to be taken by surprise when, having created a tax break, they subsequently find people taking advantage of it. Rather than launching different schemes to capture a few headlines each year only to be confronted with the need to unscramble the mess later, it would be much better to take a considered, long-term and properly consultative approach to encouraging investment and saving. We need properly thought out action, not gimmicks.
Just as the Bill is wholly inadequate on investment, it abjectly fails to tackle unemployment. The increases in beer and spirit duty that the Government propose to introduce under the mini-Budget resolutions will cost jobs. We share the concern expressed by the Treasury and Civil Service Select Committee, which said in its Budget report published yesterday:
We recommended in our Report on cross-border shopping that the Chancellor should take full account of the potential disadvantages of any widening in the level of duties between the UK and the rest of the European Union, and the encouragement this might give to increased cross-border purchases. We are concerned that this recommendation may not have been heeded and that UK industry could be damaged as a result.
Our fear and that of many in the brewing, pub, retailing and distribution industries is that those excise duty increases, further widening the cross-channel differential,

will prove a jobs killer. What is more, the unemployed will look in vain for any measures in the Bill that will effectively generate jobs. We shall argue for a proper rebate for employers recruiting the long-term unemployed. We shall put the case for phased release of local authority capital receipts, for a small business expansion scheme, for measures to increase the availability of affordable child care and for job-generating energy efficiency schemes.
We shall take every opportunity to oppose the vindictive proposal to withdraw mortgage help for the unemployed. The unemployed need jobs and training; they need help to get them back to work, not punishment that threatens to turf them out on the streets. We argue for fairness where the Government are entrenching a Britain of double standards and deepening inequality. We want action on boardroom excesses, on profiteering by the privatised utilities and on excessive bank charges.

Mr. Sykes: I am grateful to the hon. Gentleman for giving way. When he talks about chucking people out on to the streets and turfing them out of jobs, does not he realise that the Labour party's adherence to the social chapter will do exactly that? I speak not just as a Member of Parliament, but as an employer.

Mr. Smith: The social chapter—long overdue for application in this country—would extend to British employees rights that are increasingly taken for granted across the rest of the European Union. Why should people in this country suffer due to the obsessions of some Conservative Members, not all of them—I recall the speech that the hon. Member for Stratford-on-Avon (Mr. Howarth) made last week when he said that the minimum wage should apply as a matter of justice and that we should sign the social chapter. We are talking about basic rights and protecting people. The Government want to remove even the basic protection that remains after their wanton vandalism of our welfare state over the past 15 years.

Mr. Sykes: I am grateful to the hon. Gentleman for indulging me yet again. If what he says is true, what does he have to say to the people in Scarborough with jobs at a large company in my constituency, which has just, doubled its production line in Scarborough rather than build a factory in France because of the social chapter there? Jobs come here because of our lack of a social chapter and because it costs so much to employ people on the continent. That is the reason why we are the centre for Japanese and American investment—not the hon. Gentleman's policies.

Mr. Smith: We welcome inward investment, including that mentioned by the hon. Gentleman. In many such cases, the executives running those companies have stated on the record that they would be happy to comply with the provisions of the social chapter. What worries inward investors is not that we may be applying social protection in the United Kingdom in common with our European partners, but that Conservative Members' antics involve divorcing Britain from the European Union, thereby cutting us off from the business opportunities that the single market presents.

Mr. Anthony Coombs: The hon. Gentleman says that he is interested in inward investment. We receive much inward investment because we have


among the lowest rates of corporate tax in Europe. What would the hon. Gentleman say, therefore, to someone such as Howard Davies, the director general of the Confederation of British Industry, who analysed the Labour party's plans to close so-called "loopholes" in corporate tax only a year ago and found that they would increase the rate of corporate tax by no less than 25 per cent. or £3.6 billion every year? How does the hon. Gentleman expect people to invest in this country when faced with that scenario?

Mr. Smith: Howard Davies subsequently accepted that that was not the case, and I have not heard him comment about our proposals in the way that the hon. Gentleman implies.
We shall oppose two miserable and mean-minded measures in the Finance Bill. There can be no justification for the Government freezing the modest blind person's allowance for the third time in four years, especially when so many blind people have to get by on such low incomes. We also challenge the unfairness of the Bill not extending to those holding pensions in occupational schemes and retirement annuity contracts the flexibility on purchasing annuities that the Bill introduces for personal pensions. There is no good reason to discriminate against a million pensioners in that way.
As well as the Bill's unfairness, we shall also expose its absurdities and the damage that will result from the imposition of the new vehicle excise duties and registration regime. It will impose administrative burdens on emergency services and load new charges on essential service vehicles such as snow ploughs, gritters, and street-cleaning and street-lighting lorries. The new charges will affect tractors and even mowing machines. Cars on display in second-hand car dealerships will be taxed—I am sure that Conservative Members will have something to say about that.
I look forward to hearing Ministers explain how that is all part of their deregulation initiative to lift the burdens of red tape from business. I also look forward to their explaining the operation of the Bill's provisions for self-assessment in taxation. I wish that I shared the Chief Secretary's optimism that they will simplify matters. I note that he conceded that the Bill's provisions will impose additional burdens on employers. The proposal, which has a certain amount to commend it in theory, is threatened by the incomprehensibility of its implementation. After all, self-assessment is being introduced into a tax system that the Government have made increasingly complex in recent years. A crude measure of that is the number of pages of legislation on income tax, corporation tax and capital gains tax, which has more than doubled since 1982.
There is no dodging the fact that self-assessment involves a big transfer of responsibility for compliance from the Inland Revenue to the taxpayer. Judging from the Bill's complexity, many taxpayers who at present are able to manage their tax affairs without professional advice will need to employ such advice as a result of the operation of the Bill, and that advice does not come cheaply. Whereas people previously had to state just their income and capital gains, they will now have to have sufficient knowledge of the tax rules to calculate their

own liability. That will prove very worrying for many people—especially elderly taxpayers—given their legal obligation to get their calculations right.
We shall pursue how the provisions can be made to work in a fair and straightforward fashion and what help and advice will be available to taxpayers. The Government should think very seriously about the proposal because taxpayers face a double burden—insult on top of injury. Not only will they be charged more tax—in breach of the Conservatives' election promises—but they will face more worry in calculating their liability.
There is a lot wrong with the Finance Bill. Like the Budgets that it implements, it is a wasted opportunity. In place of an incompetent Government's inadequate Bill, Labour and the country want to see action for jobs, action for investment, and partnership—the only route to success for a modern economy. Where there is unfairness, division and disillusion, Britain needs investment, training, jobs, partnership and fairness: real hope for the future.
In voting against the Bill tonight and in the policies and action for which we are campaigning up and down the country, we shall demonstrate how Labour speaks for Britain and brings closer the renewal of government, which Britain needs so desperately.

Mr. Quentin Davies: The hon. Member for Oxford, East (Mr. Smith) made a characteristically vigorous speech, hut, perhaps understandably, he declined to mention the most startling fact about the British economy—the unprecedentedly favourable conjuncture of economic circumstances.
Last year, growth was slightly more than 4 per cent., inflation was 2 per cent. and unemployment declined by 500,000, compared with the trough of the recession two years ago. Productivity and investment were extremely buoyant and the increase in exports generated much of last year's growth. As a result, at a time when our economy is growing much faster than those of most of our trading partners, our balance of payments has improved substantially—in fact, we now have a balance of payments equilibrium.
That combination of factors is quite unprecedented in the lifetime of Members of this Parliament. It raises two obvious questions: first, what caused that benign combination and what was the role of Government policy in it and, secondly, how can it be sustained?
Inflation has been a disease of the British economy for the past 30 years. I think that there is general agreement, nationally and internationally, that we could not have succeeded in mastering inflation in the time scale and to the extent to which that has been achieved if we had not been in the exchange rate mechanism. The Prime Minister took the extremely brave decision to join when he was Chancellor in the autumn of 1990. It was a deliberate Government decision that has certainly brought its rewards. Of course, as often happens when one has to cure a serious disease, the medicine is not always very palatable, but it was a necessary decision and it has proved extremely effective.
Relaxation of monetary policy and the reduction of interest rates made possible by our membership of the ERM—indeed, it began at the moment when we joined the ERM and continued from autumn 1990 until the early


part of last year—have resulted in the revival in economic growth. Some economists believe that, as a general rule, there is a gap of 18 to 24 months between changes in monetary policy and those changes impacting on output. Remarkably, that rule seems to have applied perfectly in this instance: output began to revive and we came out of recession in spring 1992.
Considerable fiscal expansion ran parallel with that relaxation of monetary policy and reduction in interest rates, which contributed to re-establishing the growth of the British economy. Both policies were clearly deliberate, conscious Government actions, and they have produced results.
It is wrong, however, to look at the growth or success of any economy purely from the demand side. We all know—as we have learnt in Britain through painful experience and as the entire world has learnt in many different contexts—that it is no use increasing demand through monetary or fiscal measures if the supply side cannot respond and produce the new products, which are called for as fashions and the patterns of demand change, effectively and at a competitive cost. If the supply side cannot respond to an increase in demand, that increase in demand will simply create inflation or a massive increase in imports as the rest of world meets it, resulting in rapid deterioration in the balance of payments.
We have experienced exactly the opposite: a substantial increase in demand with falling inflation and a steadily improving balance of payments. That demonstrates that there has been a fundamental change in the British economy, which is a result of the supply side reforms that the Government have undertaken since the beginning of the 1980s, embracing the improvement in the labour market, the reduction of trade union monopolies and the diminution in the obstacles to productivity growth that beset British industry for so long, increasing flexibility, mobility of capital and labour and increased dynamism and professionalism in management.

Mr. Barry Legg: My hon. Friend mentioned our exports performance and the tremendous improvements in the current account. How much of that would he attribute to the more competitive level of sterling following our departure from the exchange rate mechanism?

Mr. Davies: It is quite clear that devaluation has improved our competitiveness, but much more striking—as I am sure my hon. Friend is aware—is the fact that our turnaround in output and emergence from the recession predated the end of sterling's membership of the ERM and black Wednesday by some six months. The devaluation was clearly not the basis of the revival in output.
One can say, however—and perhaps my hon. Friend was thinking of this—that the devaluation posed considerable dangers. At a time of rising demand, falling interest rates and rising Government expenditure, to add on to that already expansive formula a considerable devaluation of about 15 per cent. against the weighted average of currencies with which we deal could have taken the economy over the edge into inflation.
My hon. Friend brings me to my second point—where we stand on inflation. The Government sensibly and wisely responded to the devaluation with a considerable

change in fiscal policy by reducing public expenditure, or at least the growth of public expenditure, and by raising new tax revenues and reducing Government borrowing.
My hon. Friend the Member for Milton Keynes, South-West (Mr. Legg) and I supported the Government in that fiscal retrenchment and in the difficult and painful decisions that have had to be taken on taxation, as we all know so well. We defended the Government because we knew that those measures were necessary and that, if they had not been taken, there would have been a danger of increased inflation, particularly because of the devaluation to which my hon. Friend rightly refers.
The second great question I want to raise is the one that most concerns our constituents: whether such a splendid state of affairs and encouraging series of developments can be sustained. One might look again at two aspects: demand and growth on one side and inflation on the other, and we know how interdependent they are. If we run into inflation, we shall find ourselves back in the stop-go cycle that has beset us so disastrously in the past.
People are not primarily concerned with growth at present. The economy has been extremely buoyant, but it cannot continue to grow at a rate of 4 per cent. per annum, as it has in the past 12 months.
In the Red Book, the Government predict that from 1996–97 onwards the rate of growth will be 2.75 per cent. If the Government consider that 2.75 per cent. is the sustainable non-inflationary growth rate of the British economy, that represents a considerable increase in the secular sustainable growth rate of the British economy in the past. It is an encouraging picture and it reflects the supply-side reforms to which I have referred, the buoyancy of investment and the even greater buoyancy of business investment predicted for next year.
The question is how to come down gradually and gently into a sustainable rate of growth. The Government have been extremely sensible and prudent in their fiscal and monetary policy. We have had not only the fiscal retrenchment, to which I referred and which is extremely welcome, but a change in monetary policy since last autumn, when interest rates began to rise again. My right hon. and learned Friend the Chancellor has had to take difficult decisions. There is always pressure from politicians, from the media, from constituents, from industry and from borrowers, who say interest rates should be lower. We hear that unfailingly from Opposition Members, particularly from the hon. Member for Dunfermline, East (Mr. Brown) who, ever since I have been in the House, has never said anything about monetary policy except that interest rates should be lower, whatever the concatenation of circumstances and whatever the results of that policy might have been.
We know that it would have been disastrous to have said simply that interest rates should always be low. My right hon. and learned Friend the Chancellor has sensibly decided that the time has come, when the economy is buoyant and without waiting for inflation to manifest itself, to take some early measures to trim demand to a sound and sustainable level. It is striking that he has intervened to increase interest rates at an earlier stage in the cycle than ever before, and I commend him for that.
My right hon. and learned Friend has done something else, the significance of which has not been appreciated as much as it should have been. He has taken an extremely brave measure in deciding that the minutes of his monthly meetings with the Governor of the Bank of England


should be published six weeks later. There is a precedent for that in the open market committee of the Federal Reserve bank in the United States, but that is a committee of an independent central bank.
It is quite unprecedented for politicians voluntarily to decide to put such constraints on their monetary policy as will inevitably follow from publishing those minutes. No Government could easily sustain their position when those minutes were published six weeks later and it was revealed that the Governor had said that the Government's inflationary targets could not be met unless interest rates were put up and the Chancellor had replied, "No, I shall not put them up; I cannot take your advice." Complete chaos and collapse would follow in all the financial markets—in the sterling foreign exchange market, in the money markets and in the gilt market—and that would prove very expensive.
The Chancellor has placed a discipline on himself quite voluntarily. He has decided to forgo—and those of us who have sufficient confidence in him and in the Government know that they would not have wanted to use it in practice—even the theoretical possibility for the Government to manipulate monetary policy for electoral or political purposes.
That is an extremely important self-denying ordinance. The hon. Member for Edinburgh, Central (Mr. Darling) mutters into his beard—well might he do so. He is probably saying what a confounded thing that is. If, by any dreadful mishap, Labour is returned to power, it would immediately want to go for broke, cut interest rates and spend money like it was going out of fashion, but a possible constraint, on even a future Labour Government, has now been built into the system.
It is unprecedented for a Government to impose such a self-denying ordinance on themselves, but it is good monetary policy since it increases its credibility. It makes it clear to the financial markets, borrowers, savers and investors in the economy that British monetary policy will not be manipulated for short-term political purposes. That will create greater confidence in the economy and will positively affect the cost of capital, investment intentions, willingness to buy gilts and—other things being equal—the yield on gilts and the cost of funding the national debt, which we all know is too high and is a matter of concern.
That self-denying ordinance should also reduce the British economy's volatility. If monetary policy is more credible and then is altered in one direction or another, everybody will believe that the new policy will be stuck to and will not be pushed off course by political pressure. That can only be good, because adjustments of a lesser amplitude will then be needed to effect a given change in expectations and behaviour. We will achieve at least some of the benefits that countries with independent central banks have enjoyed as a consequence of the greater credibility with which they conduct and pursue sustained and consistent monetary policy.
I give particular credit to my right hon. and learned Friend the Chancellor for that. It gives us great confidence that our achievement of bringing down inflation is not a one-off and temporary but can be sustained. Of course this Parliament has experienced difficulties, but when future generations look back on it they may say that one of its great achievements was to bring to an end an era in which

the economy was blighted by the disease of inflation and that inflation then ceased to be a competitive handicap on the British economy.
The Finance Bill is, as always, far too long. A number of right hon. and hon. Members and others outside have commented that if parliamentary draftsmen cannot produce a more lucid and succinct Bill, we ought at least to market-test, to see whether outside firms of lawyers could not do a better job. Those comments have clearly not been taken to heart, but one hopes, as with many drips of water on a stone, that one will eventually have some impact. I hope that I will be forgiven if I continue to make that point.

Mr. Matthew Carrington: Does my hon. Friend agree that the complexity of the tax system—and consequently of the Finance Bill—makes an increasingly strong case for an annual taxes management Bill in addition to the Finance Bill? A taxes management Bill would be considered by a Committee that could take expert outside evidence and examine tax proposals in considerable detail, separately from the political matters incorporated in the Finance Bill.

Mr. Davies: I much appreciate my hon. Friend's expertise and I have the greatest regard for it. He makes a good point extremely well, but I hesitate because the effect of two Standing Committees considering the Bill would be that the technical Committee would tend to be marginalised and would not make quite the impact on opinion or on the formation of tax law that is desirable. The distinction between the Bill's technical and political aspects is not always as clear as some people think. What are sometimes seen as technical issues are invariably couched in incomprehensible verbiage, as in recent Finance Bills, but they nevertheless can have considerable economic impact on businesses, consumers, savers and investors. The general and political impact might be missed if so-called technical matters were brushed into a separate Committee.
I see great merit in my hon. Friend's proposal that the Committee considering the Finance Bill should take evidence from outsiders before detailed debate. That principle should generally be adopted, as I have said in other contexts. Before any major Bill is taken through the House, a Special Standing Committee should take evidence. The constitutional and procedural procedure that would enable it to do so already exists but. regrettably, little advantage is taken of it. Our procedures and scrutiny would be more effective and better legislation would go on the statute book and would not need to be revised so often if we took advantage of it.
It would be churlish and ungrateful not to acknowledge three technical aspects—to reflect my hon. Friend's intervention—of great importance, where changes for which I have been pressing for some time have been incorporated in the Bill. I refer first to changes to schedule A. I am grateful that the Government propose that the profits of companies involved in real estate should be taxed according to the same criteria used for other forms of business. A case could never be made in equity or in economic theory why that should not be so. I am sorry that the Government have not gone to the logical extent of extending that principle to companies.
I am equally grateful for the proposed changes in roll-over relief but—and I will make this point in Committee if I have the chance to do so—there is no


reason for not taking matters to their logical conclusion, which would save 30 or 40 pages of appendices. It could simply be stated that roll-over relief applies whether the funds are rolled over into incorporated businesses, assets or shares in businesses run by individuals trading as a principal.
Finally, in respect of personal equity plans, in the past I have pressed for new clauses or amendments to Finance Bills to achieve a reduction in the distorting effects of tax breaks available for retail savings, by wrapping them all up in one vehicle. I would like bank deposits, which now enjoy tax-exempt special savings account facilities, and all forms of financial instrument, including equities, convertibles and bonds, to be available through the same vehicle and on the same terms.
The Bill makes a major step forward with the proposal that bonds can be included in a PEP, for which I am grateful, but I am sorry that the Government have not gone the whole hog and allowed individuals to manage their own PEPs—to set aside a portion of their portfolios and to manage them themselves. The present PEP tax breaks do little, especially for savers on small incomes. They pay tax at the marginal 25 per cent. rate and have no reason to benefit from capital gains tax concessions that PEPs offer because they do not normally enjoy capital gains of more than £5,000 a year. Such people generally find that the tax benefits of a PEP do no more than compensate for the management fees that they have to pay to intermediaries for enjoying such tax breaks.
I should have thought that the introduction of personal assessment would be a good opportunity to go a little further and allow people to manage their own ring-fenced savings and to put into them such maximum amounts as the Government may consider that they can afford in any one year. Any breaks for such savings contribute to the favourable shift in the burden of taxation from more damaging direct taxes to indirect taxes, which has been one of the many encouraging features of Conservative fiscal policy over the past 15 years.

Mr. Denzil Davies: My hon. Friend the Member for Oxford, East (Mr. Smith) chose to quote an apt and fairly obvious text in his speech—the words of the Maples memorandum. The former Financial Secretary said:
the reality is now that the rich are getting richer on the backs of the rest, who are getting poorer.
Even the old Labour party could not have put it better than that. Certainly, this Bill does not improve matters. It probably makes matters worse. I shall try to give one reason why the rich have been getting richer on the backs of everybody else. It is partly because for the first time, certainly since the 1920s and 1930s, financial policy has economic and industrial policy in its stranglehold. The bankers and the central bankers now rule to a greater extent than at any previous time, certainly since 1945 and before.
The Government have made two major economic blunders. The first was to enter a regional, fixed-exchange system—the exchange rate mechanism—when there was very little exchange control left in the world and we had a global economy. Then, of course, when that became a disaster, the Government made another major error—partly, no doubt, in panic—and I am sure that the Treasury has regretted it ever since. In effect, as the hon. Member

for Stamford and Spalding (Mr. Davies) said, the Government handed over control of monetary policy to the Governor of the Bank of England.
Again for the first time since the war, we have a division of control: the Government control fiscal policy, at least in theory, while the Governor of the Bank of England controls monetary policy. The wretched meetings that take place every month—the Eddie and Kenny show—do not come up to Pete and Dud or Smith and Jones. Every month the two portly gentlemen sit there, take each other's temperature and no doubt also stuff a thermometer into the mouth of the British economy and perhaps other parts of its anatomy as well. After every month's meeting, the teenage scribblers in the City are in a state of neurosis trying to discover what has gone on.
I have been in the House long enough to remember fine tuning. Were I not addressing such an august gathering, I would say, "Hands up who remembers fine tuning." You probably remember fine tuning, Mr. Deputy Speaker, but I do not know whether anyone else does. Fine tuning was condemned throughout the 1970s in trenchant speeches by Baroness Thatcher and various other financial experts then on the Opposition Benches. Fine tuning was condemned as a terrible thing: how could industrialists plan for the future or for investment with all that Government interference in the marketplace?
The present monthly meetings really amount to fine tuning. Every month those involved sit down and look at the economy; then interest rates go up or down by a quarter or half a per cent. point, or by half a per cent. I feel sorry for any industrialist or business man who has to plan and invest and try to create growth in his or her business faced with the nonsense of those meetings every month.
I intended to direct a comment to the Chief Secretary, had he still been present, but I will address my remarks to the Financial Secretary. I hope that they will try to persuade the Chancellor of the Exchequer to give it a rest for a month. Why not make it every two months to let things settle down? It is ridiculous to have such an absurd division and method of conducting matters.
Once upon a time—more people may remember this than fine tuning, and we heard about it from the hon. Member for Stamford and Spalding—there was the fashionable doctrine of monetarism: the teaching and lectures of Professor Friedman, if I may use that shorthand form. It certainly existed in the 1970s and 1980s, until, Lord Lawson decided that he either did not understand monetary policy or that he was tired of it and so a different monetary policy was introduced. Lord Lawson's monetary policy was to shadow the deutschmark. Apparently nobody told the then Prime Minister, but Lord Lawson went on shadowing the deutschmark, into the exchange rate mechanism we went and the rest, as they say in Hollywood, is history.
What is happening at the moment and the way in which monetary policy is being controlled is not monetarism. I have some respect for intelligent monetarism, but the present policy is not even monetarism. M3 has practically gone out of the window. M4 has gone, MO has gone and also M1. I even remember domestic credit expansion—hands up who remembers that—and I remember sterling M3 as well. Clearly, few Conservative Members know very much about such things, so perhaps one should delve back in time a little, although I accept entirely that we should not become trapped in history.
Today's policies are not monetarism because monetarism had a certain rationality, although it did not work very well. Perhaps that is why Lord Lawson gave it up and why none of the central banks of the world, although they may pay lip service to it, pays much attention to M3 and M4. The Bundesbank still pretends, but it misses its targets most of the time and when it misses its targets it does not adjust its guidelines or ranges.
Now we have something quite different, although I am not really sure what it is. I suppose if one hands over the control of money to the high priests of the mysteries, one ends up with some kind of mystical monetary policy. I can describe it only as a kind of monetary policy based on the jus naturale or natural law—a kind of medieval policy. Apparently, the Governor of the Bank of England knows the natural growth rate of the British economy. I do not know what it is, and I do not suppose that the Governor knows either although he pretends that he does. It is a little like the old courts of equity, which used to say that justice varied according to the length of the Chancellor's foot. Perhaps the natural growth rate of the British economy varies in a similar way.
Apparently there is a natural growth rate and woe betide us if it increases by a little above that natural growth rate: if that happens, up go interest rates, the Governor gets into a terrible state and the Chancellor has to do as he is told. Again, I feel sorry for the industrialist who has increased productivity, whose growth is greater than the natural growth rate and who is trying to create jobs and investment. Along comes Eddie from the bank and tells him that he cannot do that, up go the interest rates and the industrialist has to pay more for his money.
How on earth are we expected to have investment-led growth in the British economy if the Governor of the Bank of England is for ever knocking any such growth on the head whenever he feels that the natural rate has been exceeded? Moreover, it is depressing that the natural rate seems to be based on extrapolation from the past. Sadly, governors of central banks, like generals, tend always to be fighting the last war, which can have very damaging consequences for an economy.
There has been no real attempt to consider the changes that have taken place in the British economy over the past 10 years: the changes in the labour market, the massive global changes that are taking place in the economies of many countries in the world, the fact that tariffs are coming down and will rapidly disappear with GATT, and all the pressures on costs—those matters are apparently not taken into account. Instead, we are told that the high priests—the bankers—know what the natural growth rate is.
Unemployment, too, is a favourite target for central bankers. Again, apparently, there is a natural level of unemployment. What a cheek they have. According to the Governor, in a lecture a week or so ago, there is something called structural unemployment. I do not know what that is, but clearly the Governor does. If, at one of those monthly meetings, it appears that one extra poor individual has found a job, taking the number of unemployed below the natural level, up go interest rates to hit him on the head and ensure that no one else gets work.
One may tease and satirise, but it is a brutal, cynical and cruel policy because it targets the unemployed on the basis of very little rational analysis of what is happening. Moreover, not only is that the Government's policy operated through the Governor of the Bank of England; I am sorry to say that my right hon. and hon. Friends on the Opposition Front Bench also seem to support the handing over of monetary policy to a central bank. That happened in the 1930s when both main political parties paid obeisance to Montague Norman and it is happening again. All the fashionable opinion in this House and all parties apparently dare not question the nonsense currently known as monetary policy.
If I were unemployed, I would ask, "Who needs a Bank of England?" I spent four years as a Treasury Minister, with responsibility not for the Bank of England—thank goodness—but for matters covered by the Bank, and I often asked myself that question.
In those days, the Bank of England did certain things. It had to control the movement of capital and there was exchange control. That involved 400 people pushing pieces of paper around. I was responsible for banking legislation and, perhaps foolishly, I decided that the Bank of England should be the institution to deal with banking regulation. That responsibility could have gone elsewhere or to another institution.
After 1979 and the changes in the 1980s, the Bank of England still regulates the banks, but exchange control has gone. With floating exchange rates, who needs central bankers? Apparently, the Bank of England sold Government stock. I do not know whether the Bank is responsible for that. When I was in the City a very long time ago, there was a splendid man with a high hat and pin-stripe trousers employed by a firm called Mullens and Co. which had been selling Government stock for about 200 years. Apparently that company knew all about selling Government stock and did it very well. I am not sure whether the sale of such stock is still contracted out. If it is not, there should be market testing for the Bank of England.
What does the Bank do? I have been told that central bankers provide marvellous lunches. Apart from that, and clobbering the unemployed, what does Eddie do for his money? In all fairness, someone must ask on behalf of the unemployed, "Who needs Eddie George? Who needs the Bank of England?" My view may be old fashioned, but I believe that it is wrong for Governments to hand over control of important matters relating to the economy and of monetary policy when those matters affect the livelihoods—and sometimes the lives—of people. It is wrong for Governments to hand over control to undemocratic and unelected institutions, but that is what has happened and it is no business of an Opposition to support a Government who do that.
One of these days there will be a catalyst. One of these days the fashion will change again. Until it changes, I do not see much investment-led growth coming to the British economy or much reduction in unemployment. The rich will get richer, the rest will get poorer, and the poor and the poorer will have no hope because democracy will not provide them with any hope.

Mr. Barry Legg: It is always a pleasure to follow the right hon. Member for Llanelli (Mr. Davies). His speeches are always


entertaining, witty and erudite. I cannot agree with much of his speech, but I am glad that he took the opportunity to remind the House of his time as a Treasury Minister during those halcyon days of Lord Healey.
When Lord Healey presided over the economy, interest rate stability was the order of the day. British industry, and those who tried to run British industry, had the certainty of stable interest rates under Lord Healey's guidance. They had low inflation and an economy which usually had to face at least two or three Budgets a year.

Mr. McAvoy: Would the hon. Gentleman care to reflect on his own record in respect of presiding over financial matters?

Mr. Legg: My financial record is outstanding. My contributions, in national and local government, to saving money and to efficiency are outstanding.
I agree with the right hon. Member for Llanelli that our affairs are still overshadowed by the figure of Lord Lawson. The shadow of Lord Lawson is still cast on the making of our economic policy. Lord Lawson will certainly rank as one of the more interesting Chancellors of modern times. He was certainly a great reforming Chancellor with regard to taxation. However, his reputation was badly tarnished by the financial mismanagement of monetary policy in the late 1980s, to which the right hon. Member for Llanelli referred, when we followed a policy of shadowing the deutschmark. Hon. Members will also recall that he advocated our membership of the exchange rate mechanism.
Lord Lawson's mistakes in monetary policy still affect our economic policy making today. However, we can understand why the Government have paid so much attention to trying to get monetary policy right and to providing monetary stability.

Mr. Clive Betts: Do the hon. Gentleman's comments about Lord Lawson apply, in terms of his criticism of policy at that time, to the then Chief Secretary to the Treasury?

Mr. Legg: Opposition Members, and particularly the hon. Member for Durham, North (Mr. Radice), will recall that, when Lord Lawson appeared before the Treasury and Civil Service Select Committee, he was asked to comment on the making of monetary policy. He said that interest rates went up when he said so. That was how monetary policy was run under the stewardship of Lord Lawson.
My colleagues on the Treasury Bench can be rightly proud of the fact that the making of monetary policy is now more open and more balanced. I support the current openness, and I believe that the publication of the minutes of the meetings between the Chancellor and the Governor of the Bank of England improves the economic debate in this country. They show the people who are running businesses and investing in this country how monetary policy is being made.
I do not agree with some hon. Members and commentators who believe that the Governor and the Bank of England have been given de facto independence. When the Governor gave evidence to the Treasury and Civil Service Select Committee, he took pride in the fact that he took the initiative in respect of the last interest rate increase. When the Chancellor gave evidence, he admitted that some power has passed from the Treasury to the

Bank. He believed that that was good for the markets and that they now had more confidence in the making of monetary policy.
I do not believe that there is de facto independence. I believe that we have arrived at a halfway house. The way in which that halfway house operates must be considered further. My hon. Friend the Member for Stamford and Spalding (Mr. Davies) referred to the open market committee of the Federal Reserve bank in the United States, which also produces minutes. However, if we consider central bank operations in the United States and in Germany, it is clear that there is a more collegiate approach to monetary policy.
One of our present problems is that, from the minutes of the monthly meetings between the Chancellor and the Governor, it is clear that a whole range of indicators have been brought into play. Decision making on interest rate policy seems to be all too anecdotal.
Again, in the rhetoric of the Chancellor and the Governor we find much about stopping the boom-and-bust cycle. That is an echo of the late 1980s and of the problems that we experienced under Lord Lawson. But if we look at the figures in Red Book and at what is happening in the real economy, we can see very little chance of boom and bust in the current monetary environment.
The monetary environment in the United Kingdom, like that in most G7 countries, is very subdued. Domestic demand in the United Kingdom is running at about 2.5 per cent., and overall growth is running at 4 per cent., but the major contributor to that overall growth level is a greatly improving exports position. About 1.5 per cent. of the total increase in GDP is due to excellent export performance. Domestic demand is probably growing at only about trend level—2.5 per cent., perhaps less—because part of that growth in domestic demand is due to current stock-building.
I see no justification for trying to put up interest rates on the basis of trying to discourage domestic consumption or, as we have heard in the past, to restrain house prices, for instance. House prices and asset prices are very subdued. Domestic consumption is also subdued.
I have some words of caution for the Chancellor in his meetings with the Governor. In the Red Book, we find that interest rate policy and monetary policy are supposed to be set according to expectations of inflation levels in two years. At the previous meeting of the Governor and the Chancellor, when the Governor requested an increase in interest rates, his forecast for inflation in two years—the forecast of the Bank of England—showed a falling expectation for inflation. In his discussions, the Chancellor certainly needs to be sceptical of further requests from the Governor for interest rate increases.
The other aspect of the Lawson years was very effective taxation reform. Lord Lawson had a successful formula for taxation reform, and that was to establish lower rates and broaden the base. The Finance Bill has several tax reform measures, but I draw hon. Members' attention to changes in relation to capital gains tax in particular.
On capital gains tax, we seem to be moving in the opposite direction from the Lawson principle of lowering rates and broadening the base. Capital gains tax remains high—40 per cent. Few of our competitor countries have fixed capital gains tax at 40 per cent. Treasury Ministers


also recognise that that is too high a level of taxation, because their strategy, rather than to lower the rate or fundamentally to reform capital gains, is to increase exemptions, backed up by tough anti-avoidance provisions.
We see in the Finance Bill several measures to extend exemptions. There are now incentives for investing in quoted companies through personal equity plans. There are now incentives for investing in unquoted companies through venture capital trusts and through enterprise investment schemes. There are now arrangements whereby people can roll over capital gains between trading assets and also roll over capital gains into shares. We have a range of exemptions to the capital gains tax legislation.
Hon. Members can justify all those changes and all those exemptions as having very worthy objectives, such as the objective of further investment, about which we have heard from my right hon. Friend the Chief Secretary this afternoon, but however worthy those objectives might be, certain fundamentals do not change.
Risk does not change. At the moment, many people do not invest in venture capital because they assess it to be a high-risk sector of the market. Changing the tax regime will not alter the basic risks involved. Also, the more financial vehicles that one sets up to try to find exemptions and ways around the very high levels of capital gains tax in the United Kingdom, the more financial intermediaries are involved. Financial intermediaries want remuneration for their involvement. We need to see root-and-branch reform of capital gains tax.
We are overtaxing capital gains, only to relieve certain favoured activities. That fundamental approach of overtaxing an activity as a whole but picking favoured activities that one wants to relieve from tax is very interventionist. It is an approach that Opposition Members often advocate. It does not fit altogether easily with a Government who are committed to the free market.
I have a word of caution also on loopholes. We have heard much from the Opposition about loopholes and the enormous amount of tax they might raise. Conservative Members have certainly highlighted the fact that the Opposition are really talking not about loopholes but about extra taxes. My right hon. and learned Friend the Chancellor, in his 1993 Budget, to some extent sought to steal the Opposition's thunder by bringing in—provisionsanti-avoidance legislation—which he claimed would increase the taxation take by about £2 billion. He thought that £2 billion extra over three years could be gained by bringing in legislation which, to some extent, blocked loopholes.
My right hon. and learned Friend considered many of those loopholes to apply to capital gains tax. It is interesting to look at this year's Red Book and the figures that the Inland Revenue has provided for its estimate of the take from capital gains tax in the current year. We find that it has revised the estimated revenue down from last year's figure of £1.3 billion to £0.8 billion. For the subsequent year—1995–96—the figure is only £800 million. I suspect that the Inland Revenue's claims for substantial increases in revenue from blocking loopholes and putting in place significant anti-avoidance measures are not borne out in practice.
I urge Treasury Ministers to keep an audit of those projections for extra revenue from anti-avoidance provisions, because I do not think that they achieve the figures that were originally set out. I am sure that Ministers widely accept that, in today's global economy, people and capital are very mobile. If we seek to inhibit the way in which people undertake transactions in their attempt to obtain a little extra revenue, they often take advantage of mobility, do their transactions differently, or are less active in their investment procedures.
Overall, a full reform of capital gains tax, based on a tapering system whereby those who invest in capital for the long term in this country are properly rewarded by having a reasonable overall level of taxation levelled on their gains, is the correct route to take.
My right hon. Friend the Chief Secretary highlighted some of the fine aspects of the legislation. Some of the reforms that he particularly highlighted are those in respect of self-assessment, which he believed would help the British economy. From a cursory look at the Finance Bill, I endorse many of the comments of my hon. Friend the Member for Stamford and Spalding and his concern about the standard of draftsmanship in the legislation and about the obscurity of some of the legislation. In looking at the Finance Bill, we must bear in mind the fact that the Government's policy is to deregulate.
One must be very careful, when putting another 350 pages of taxation legislation on the statute book, that one is standing true to the overall principle of deregulation. Many of the provisions will have to be interpreted by Inland Revenue staff throughout the country, and there is no guarantee that they will be able easily to understand the detail and interpret those provisions properly. The process of trying to understand them will be a burden on British industry and business.
The right hon. Member for Llanelli told us a great deal about economic history in the UK. Those of us who have been in the House for a comparatively short time were grateful for his tour de force. He took us back over at least 20 years. I remember a spe
ech by Sir Keith Joseph in 1979—the Stockton lecture, entitled "Monetarism is not enough".
The centrepiece of the Red Book and the Government's financial strategy has some worthy elements—for example, low inflation, exchange rate stability, low national debt and, right at the heart, a declining public sector borrowing requirement. Those elements are at the core of the Government's strategy. The right hon. Member for Llanelli and other hon. Members on both sides of the House will recognise them as the convergence criteria set out in the Maastricht treaty.
We cannot have a successful economy simply by looking at convergence criteria. They are not particular economic virtues in themselves; their whole purpose is to produce a certain level of fiscal stability, so that central bankers running a European central hank can set an interest rate policy across Europe in the knowledge of that stability in debt levels and fiscal policy. Basically, it is for their convenience that convergence criteria have been put at the forefront of economic policy both in the United Kingdom and in many of our EU partner countries. However, convergence criteria are not enough to ensure a healthy economy.
My right hon. and learned Friend the Chancellor has introduced many supply side measures that will help the economy, but we must be very conscious of the overall level of public spending. I remind hon. Members of a statement by Lord Lawson in 1977:
The real evil of excessive Government spending, and the excessive taxation that must necessarily accompany it, lies … in the certainty of misallocation of resources, economic and social debilitation, excessive state power, and—very far from least—the erosion of personal freedom.
Conservative Members are very concerned to guard against excessive state spending, which has often been made tolerable for many people in the productive economy by high levels of inflation. Governments have spent heavily on behalf of the state, but usually it has been at the same time running very large Government borrowing requirements, which have been financed by inflation. Those who bought Government debt in those circumstances have never received the returns that were originally implied.
The world financial and economic environment today is different. Inflation is very subdued, with especially low levels in the United Kingdom. Running large budget deficits under those conditions is not sensible economics. In the United Kingdom and in many other countries people are having to pay much higher levels of taxation to finance high levels of public spending. There are limits to how much people are prepared to pay.
The Red Book shows that the level of taxation is now moving up to 40 per cent. of gross domestic product. Clearly, there is resistance to further increases and to the tax base being spread even more widely. Western European countries have often taken that into account by switching their tax-raising powers from direct to indirect taxation, but even with indirect taxation, there are limits on how far a Government can go.
If Governments increase indirect taxation excessively, people may stop buying goods or they may resort to the black economy. If taxation weighs especially heavily on the poor, or if it is perceived to do so, the Chancellor—as we have seen in recent weeks—may fail to get support from Parliament. Therefore, the overall levels of taxation caused by excessive Government spending need to be kept under review.
Currently, middle England is suffering from an excessive level of taxation. The tax burden on many people has risen over the past few years, and there will be further rises in the next 12 months. To make that tolerable, the Government's commitment to containing public expenditure and driving down excessive levels must be renewed and strengthened. That priority must be at the centre of our economic policies, because it is a necessary ingredient to reinvigorate the confidence and enterprise of the British people.
That is a clear divide between Conservative Members and Labour Members. The whole philosophy, strategy and policies of Labour Members, whether or not they wish to declare them, are driven towards ever higher levels of public spending. With that, and with low inflation, it is inevitable that the Labour party stands, and always will stand, for high levels of personal taxation. That is the charge which it must answer in this House and which, in due course, it will have to answer at the hustings.

Mr. Malcolm Bruce: The hon. Member for Milton Keynes, South-West (Mr. Legg) basically said that the Government need an economic policy that will work. He has told us what is wrong with their policy 15 years after it started. Those of us who have been in the House a few years have been on that roller-coaster a few times.
The hon. Member for Stamford and Spalding (Mr. Davies), in his characteristically euphoric way, selected the good news. There is some good news and those of us with a genuine interest in the British economy welcome that. However, the hon. Gentleman showed a confidence that history suggests should be tempered with caution. In particular, he implied that inflation was now conquered. There is no question but that inflation is low and is staying at a low level, and that is welcome. However, when we talk, as most of us do, to business people, we do not find an underlying feeling that it will necessarily stay low or, indeed, that interest rates will stay low. In fact, real interest rates are high and rising, which possibly explains why Britain's investment climate is not good. It is certainly nothing like as good as the Government forecast. I am sure that the hon. Member for Stamford and Spalding will acknowledge that those of us who serve on the Select Committee were sceptical about that forecast.

Mr. Quentin Davies: There is no difference between me and the hon. Gentleman. We both agree that it is important that inflation is kept down. We both agree that inflation has been brought down to encouraging levels. We both agree that we must not be complacent about that.
It is precisely because we must not be complacent that I commended the Government on taking several courageous steps. I specifically mentioned three—the decision to increase interest rates much earlier in the cycle than has previously been the case; the decision to increase taxation and reduce the fiscal deficit; and the decision to underwrite the soundness of monetary policy by publishing the minutes of meetings between my right hon. and learned Friend the Chancellor and the Governor of the Bank of England. The hon. Gentleman cannot have listened to the points that I made.

Mr. Bruce: I shall not make the mistake of giving way again to a repeat of the speech that I heard the first time. The hon. Gentleman will hear my argument develop, and perhaps he will get my point.
We constantly hear Ministers and Conservative Members say that the Government's objective is to lower taxes and public expenditure. The reality is that, after 15 years, they have succeeded on neither count. They have not reduced public expenditure as a proportion of gross domestic product. Nor have they reduced the tax take—in fact, they have increased it. From 1974 to 1979, the period of the previous Labour Government, when Denis Healey was Chancellor of the Exchequer, total taxes as a percentage of GDP amounted to 35.75 per cent. The Government predict that, by the end of this Parliament, the tax take will be 37.75 per cent. of the total. That is the prediction of a Government who not only say that they are committed to tax cuts, but pretend that they have delivered them. Not only have they not done so; they have presided over the biggest single increase in taxes in one year under any Government of any persuasion.
I hope that the Government's record and their credibility are wearing impossibly thin. They will find it extremely difficult to persuade the British people that,


even if they have the genuine desire to deliver, they have the slightest idea of how to do so. They must be judged on delivery and not on their ambitions, which they have not fulfilled.
Most people will remember that a major feature of the previous general election was the claim that people would face an enormous tax bombshell if there was a change in government. As a result of the previous three Budgets, the average family will pay more than £1,000 a year more in tax than they did before the previous general election. That resulted from electing a Government who specifically warned the public against the dangers of electing anyone else, saying that they should fear tax rises.

Mr. John Townend: rose—

Mr. Bruce: If I may, I shall proceed because an important argument needs to be developed.
The other problem that the Government ignore is the massive and apparently unshiftable increase in unemployment. Again, I am not speaking as an apologist for the Labour Government. In a sense, I am independent of their record, but the facts speak for themselves. Many of us remember the poster that read, "Labour isn't working". I seem to remember that unemployment at the time was 1 million. It is now running down from 3 million to 2.5 million. The right hon. Member for Llanelli (Mr. Davies) referred to the concern of the Governor of the Bank of England about structural unemployment. He says that he does not think that it can go much below 2.5 million. Other commentators say that that may be right, but perhaps it can go no lower than 2 million.
The cost of unemployment is, fundamentally, making it impossible for the Government to get out of their economic bind. It is worth summarising that the total cost of unemployment is £25 billion. The difference between the net extra cost of unemployment when the Government came into office and the cost now is £15 billion a year. The benefits of receipts of £118 billion from North sea oil and £77 billion from the privatisation windfall have been wiped out by the cost of unemployment. It is not good enough for Ministers to say that they do not believe that there is an unemployment strategy. Alternatively, they believe that simply to lower inflation, to cut public expenditure and to cut taxes will solve the unemployment problem. Evidence suggests that the contrary is the case.
The country is now entitled to say that, after 15 years of failed economic policies, however honestly pursued, the party in government has had 15 years too much credit. It really is time to start looking at alternative ways of prioritising our economic objectives and delivering them. Clearly, we must do something to achieve that.
On the specifics of the Chancellor of the Exchequer's Budget strategy, it was ironic that the hon. Member for Milton Keynes, South-West lectured previous Governments for having sometimes three Budgets in a year when the Government have just produced two Budgets in a week. That suggests that some people are standing in a pit and do not realise which way the mud is flying.
A particular concern has been highlighted. The hon. Member for Oxford, East (Mr. Smith), who opened the debate for the Opposition, drew specific attention to a paragraph in a Treasury and Civil Service Select

Committee report. I asked the Committee to include it and it agreed to do so. It is specifically relevant to the issue of duty on alcohol.
I urge the Government to get to grips with the matter. The Chancellor made it clear in Budget No. 1 that he recognised that no justification existed for increasing the duty on alcohol. Ironically, he decided to cut the duty on sparkling wine. He acknowledged that an increase in duty would have two problems. First, it would aggravate the problem of cross-border shopping because of the differentials. Secondly, it would hit hard a major domestic industry, especially the spirits trade, but also the brewing industry. A week later, what did he do? He imposed taxes that widened the differential and that hit that important industry.
I shall declare a clear constituency interest. I represent whisky distilleries. Boundary proposals affecting my constituency, assuming I am successful in winning under the new boundary arrangements, will mean that I quadruple the number of distilleries that I represent. It is an important Scottish industry and an extremely important British industry. It is ironic that no one ever speaks about this, but the gin industry is not unimportant either. We produce those two important export products. Those industries employ a great many people and earn a great deal of foreign exchange. We should treat them with sensitivity. They all require a strong and healthy home market to be successful in the export market.
I urge the Chancellor of the Exchequer—perhaps the Financial Secretary could respond to this—to say what he will do about that, or that he will do something about it before the next Budget, because the industry cannot be left in such uncertainty. I have spoken to a number of people in the industry and visited one or two of the distilleries in my constituency. There is real anxiety that they will lose out and a feeling that their competitors in other countries receive a somewhat more sympathetic hearing from their Governments, who understand the importance of the matter. I urge the Government to respond to that.

Mr. John Townend: It is not just about having sympathy for those industries. If we are in the European Community, it is only right and proper that our industries should be able to compete on a level playing field. Does the hon. Gentleman agree that one of the real dangers is not just the personal buying, but the smuggling that is going on at an increasing rate, and in which criminal elements are starting to appear? We all know what happened in America during prohibition. Does he agree that a danger exists?

Mr. Bruce: I do and I have acknowledged that, although I am still puzzled by the Government's cut in Customs and Excise staff. It is essential that we attack and intercept smuggling, but the hon. Gentleman will acknowledge that part of the incentive for the smuggling is the wide differential in prices. That is not an argument for eliminating that. We should try to persuade our European partners to recognise the public policy benefit of not having alcohol duties that are too low. They should be encouraged to increase them a bit. We cannot, however, worsen the position by widening the differential. I agree with the hon. Gentleman, but we must approach the matter at both ends—at the market as well as at the crime and smuggling ends. The Government picked a strange time to impose that saving.
I have another concern. I had an exchange with the Chief Secretary to the Treasury when he was giving evidence to the Select Committee, and he did not satisfy me that the Government are as rigorous as they make out in keeping public expenditure under control. In particular, the Liberal Democrats have identified a number of areas of Government extravagance and waste that should be dealt with. Government spending on advertisements and entertaining has increased by several times the rate of inflation, with no evidence as to how that could be justified. Massive amounts of money are spent on consultants. I am not against consultants in principle, but the Government's own evidence suggests that the net financial benefit is very small. That seems to be a clear waste of money.
I found it interesting that the Chief Secretary to the Treasury took the view that it was unreasonable when the economic outturn was rather better than forecast for Government Departments to be expected to trim their budgets during the year. He said that it would create far too many management problems. Yet it is exactly what is imposed on local authorities and other agencies all the time.
The Department of Transport has told the railway operating companies—I know about ScotRail in particular—that they must find savings in the current financial year of between 5 and 10 per cent. That, of course, is to pave the way for privatisation. Incidentally, the consequences of that for Scotland are extremely severe. There is only one profitable rail service in Scotland. As the management in Scotland has said, there is only one possible way for a company that only operates trains—it no longer owns the track—to achieve cuts. It is to stop running loss-making trains. As every service in Scotland is a loss maker bar one, the consequences for the Scottish transport system are potentially devastating. It is not good enough for the Minister to say that the Government cannot do it to their own Departments, but they are prepared to do it to outside bodies.
The Government suggested this year that they had achieved enormous savings, but those savings were achieved simply by errors in forecasting and because the economic outturn was better than anticipated. That is fine, but it is not a real saving in terms of rigorous attack on waste. In that sense, the Government have not been as credible as they would like us to think.
Therefore, it is extremely important that the Government do not make the same mistake that was made during the Lawson years of talking about economic miracles and the fundamental transformation of the British economy. There is no evidence that we have achieved a position in which the British economy is capable of earning the increased amount that it needs to ensure that we can sustain our public spending programme and maintain our competitiveness. There are signs that the foundations are being laid. I hope that they are, but one would have to talk in terms of two, three, four or five years and the accumulated benefits of those five years before one could say that we had achieved a fundamental shift.
It is a big mistake to latch on to the good figures when we are coming out of the recession and to claim something much more far-reaching that is not justified. The warning in that is that politically motivated tax cuts in advance of an election, which are not justified by the economic performance, will have a severe negative effect

subsequently. The Government should understand that the public will not be taken in twice. The public know what happened last time. The tax cuts were clawed back with interest and an awful lot of pain. Interest rates had to go up and we were knocked into a deeper recession than otherwise would have been necessary.
The Government have to recognise that if they want to talk about responsible and sound public finances, they have to do so at election time as well and not only in the immediate post-election period when it is much easier to make bold decisions and stand by them in the hope that they will get away with it in the long run. That has been alluded to even by Conservative Members. I seem to recall that the right hon. Member for Shropshire, North (Mr. Biffen), in his own dry way, once or twice has pointed out to Ministers that this time they might not find it so easy to fool people because the people were not likely to be taken in so readily twice.
As the Bill moves into Committee, we believe that the Government have either missed or failed to recognise opportunities on certain issues. As Liberal Democrats, we believe that certain reforms or changes in tax structure should be considered. I have already mentioned the duty on spirits. We shall certainly resist the Government's increases in duty on spirits in particular.
We believe that our proposal for reforming vehicle excise duty would be environmentally beneficial and would be welcomed. We intend to promote that. Our proposal is essentially to tax people on the use of their cars rather than on the ownership. We would switch the burden away from vehicle excise duty and put it on to petrol duty. Our calculations suggest that the overwhelming majority of motorists, even in rural areas, would be better off and the environment would also be better off. The Government could readily adopt such a proposal.
Several parts of the Government's new proposals for enterprise promotion and so on have already been mentioned. It is interesting that every time the Government introduce a new tax break, they by definition introduce potential new tax loopholes. The Government should at least respond constructively to any suggestions that potential abuses could be avoided before they have developed. We intend to make such suggestions.
It has been suggested that another way to promote energy efficiency may be to alter the VAT structure for energy-efficient building materials. That could usefully be debated. One of the ironies of the new 8 per cent. VAT rate on fuel is that it could be used for other items. Energy-efficient materials are one such item that is well worth considering.
We feel that several other proposals can and should be considered. Some of them have already been suggested from the Labour Front Bench and some have not. The Finance Bill is an enormously long Bill, with remarkably little in it. I echo the view previously expressed. Why do we have to say so little at such enormous length and tire ourselves out for so many hours in the process? I hope that we shall have some sharp and genuine debates on some real issues of tax policy, in which the Government might be constructive in recognising that there are some genuine ideas that come from outside their circle. If those ideas are not ready now, they will certainly be ready to be properly assessed and considered in Committee. We look forward to playing a constructive role in that process
Having said that, we have no confidence whatever in the economic policy that lies behind the Bill. In the circumstances, it is high time that the Government recognised that they have run out of steam and that it is time for other people and other ideas.

Mr. Anthony Coombs: Before I say something about the economic background to the Finance Bill and the measures in it, I should like to comment on the interesting but slightly grudging speech of the hon. Member for Gordon (Mr. Bruce). He talked in particular about the rate of unemployment in Britain, which is 8.8 per cent. It goes without saying that every person in the House wants to do all that he or she can to effect a reduction in that rate. It is significant that the unemployment rate in Britain has been reduced by about 450,000 in the past two years. Vacancies are now at their best levels for the past four years.
As Britain exports some 30 per cent. of our manufacturing output, we do not live in isolation. We depend greatly on the worldwide trading environment. To that extent, it is worth comparing employment rates in Britain with employment rates elsewhere in the industrialised world. On those grounds, we fare rather better than the hon. Member for Gordon would have us believe. Our unemployment rate is 8.8 per cent. In Belgium, it is 14 per cent.; in France, 12.6 per cent.; in Italy, 11.9 per cent.; and even in Germany it is about the same as here, at about 8.2 per cent.
The significant point to make is that those countries that have the lowest ratio of taxation to gross domestic product—the United States with 5.4 per cent. unemployment, Japan with 2.9 per cent. unemployment and Switzerland with 4.5 per cent. unemployment—have the most significantly reduced unemployment. That shows effectively that, so long as the tax burden is lifted from industry and it operates in as deregulated an environment as is humane and sensible, industry will produce the jobs that we and all our constituents want in Britain.
The background to the Finance Bill was summed up rather accurately in the report on the Budget by the Treasury and Civil Service Select Committee, which was published a few days ago. The Committee said that the background was
the most encouraging economic environment for some years
and that the Chancellor, who had appeared before the Committee, was justified in saying that there were enormous grounds for encouragement.
I happen to believe that our economy is right for a period of sustainable growth. We have relatively high and increasing productivity, a good export performance, low inflation, good industrial relations and the sort of supply side measures that lead to significant and sustained performance. That is borne out by business surveys. The latest west midlands business survey, for autumn 1994, said of the business climate that
65 per cent. of firms believe business conditions in the West Midlands will improve and only 11 per cent. expect them to worsen".
The Confederation of British Industry survey for the west midlands, published at the end of last year, showed that 80 per cent. of companies polled expected that their sales

and output would increase during the next two years. About 60 per cent. expected net increases in their labour force over that period.
The hon. Member for Oxford, East (Mr. Smith) described the effect of the Finance Bill on small businesses somewhat grudgingly, despite the fact that many of the measures will be of great benefit to small businesses, and I am not alone in thinking that. The hon. Member for Durham, North-West (Ms Armstrong), who is on the Opposition Front-Bench finance team, will be aware that the Durham university business school did a commentary on the 1994 Budget for small businesses, in which it said:
Small businesses will benefit more than most other sectors of the population.
Although it said that the short-term benefits might be "marginal", it thought that the longer-term benefits would be significant. The commentary ended:
on reflection, this was a good Budget and entirely appropriate for the current economic circumstances".
It also mentioned the enterprise investment scheme and venture capital trusts and stated that the latter "can only be beneficial" for small companies. The Finance Bill and the Budget are entirely appropriate to the time and to the needs of small businesses, which produce so many jobs.
We talk a great deal about the feel-good factor. Obviously, as politicians, we want that factor to emerge because it is often reflected in the opinion polls. In one sense, however, the fact that the feel-good factor is not as evident as we would like, although the retail environment has changed recently, is evidence of the success of policies that have changed aggregate demand from consumption to exports and investment, which are significantly improving in the present environment and will lead to sustainable growth. It is no coincidence that, although consumer spending is increasing by only 2.4 per cent. per year—the Christmas figures were slightly higher—in real terms, export performance improved on last year by about 14 per cent. That improvement will underpin future sustainable growth.
I am not saying that we can be complacent, for example, about the effect of a slowly improving housing market on various sectors of the economy. I come from Kidderminster, which depends on the housing market for the sale of its carpets. Although we can talk of moving resources away from the housing market by reducing tax relief on mortgages, it is crucial for consumer confidence and for the building industry, which could employ about 750,000 people with an upturn in the market, that that improvement is maintained.
I agree with the right hon. Member for Llanelli (Mr. Davies) that the Finance Bill and the Budget were possibly predicated on too conservative—with a small as well as a large c—a view of the natural trend of growth in the economy. Between 2 and 2.5 per cent. is too low. In the late 1980s, we produced levels of 4 per cent. and, in one year, of almost 5 per cent. Provided the Government maintain a secure grip on public expenditure and are thereby able to reduce taxation, I do not see why we should not do so again. I want the Government to reduce taxes at the lower end and to move more people out of taxation, as well as adding to the 5 million people who pay tax only at the 20 per cent. rate. That would stimulate the economy and gain a natural growth rate significantly


higher than the rate which we are enjoying and one which would approach the growth level that we enjoyed in the late 1980s.
I want to comment on three aspects of the Finance B ill—[Interruption.]

Madam Deputy Speaker (Dame Janet Fookes): Order. I am sorry to interrupt the hon. Gentleman, but a certain amount of comment and conversation seems to be coming from Opposition Members. I hope that none of the hon. Members whom I have noticed engaging in those activities is expecting to catch my eye later.

Mr. Coombs: I understand that there is a maiden speech next, Madam Deputy Speaker, and there might be a certain amount of anticipation about that.
It is nonsensical for capital gains tax to take up no less than 365 pages of taxation literature. As my hon. Friend the Member for Milton Keynes, South-West (Mr. Legg) said, at 40 per cent., it is significantly higher than the general rate of income tax and it inhibits the movement of assets. Within the capital gains tax regime, there is no differentiation between long-term and short-term gains. Significantly, I think that it was the hon. Member for Islington, South and Finsbury (Mr. Smith), speaking for the Labour party during a previous Finance Bill Committee in 1992, who proposed that the tax should be tapered for longer-term gains. The present rate is counter-productive. Studies in the United States have shown that a rate of about 15 per cent. would maximise revenue.
Although there are various ways of reducing the capital gains tax burden, as my hon. Friend the Member for Milton Keynes, South-West said, increasing exemptions without decreasing the rate is not the way to go about it. An axe has to be taken to that Gordian knot and the rate of capital gains tax should be significantly reduced.
During the past few days, other hon. Members and I have been lobbied by constituents who employ a significant number of people in amusement arcades—[Interruption.] That may be a matter of hilarity to Opposition Members, but between 90 and 120 people in my constituency rely on that business for their livelihood.
Various other forms of gambling have been protected from the effects of the national lottery. The number of jackpot machines allowed in casinos has increased and concessions have been made to bingo clubs, the pools and even to betting shops—it is proposed that the latter should be able to have cash-only win machines. Despite those concessions, the gaming machine licence duty will increase by about 19 per cent. as a result of the Finance Bill and, for the first time, an amusement machine licence duty of £250 will be imposed on video machines.
It is expected that that measure will take no less than £60 million out of the industry's profits because it cannot be offset by higher charges to consumers. Inevitably, as has been said by the leading firm of City accountants, Pannell Kerr Forster, which looked into the effect of the duty, it will lead to not only a reduction in employment and job losses of 4,600—that should be of interest to Opposition Members and everyone in the House—but a loss of £15.8 million a year in national insurance and pay-as-you-earn contributions, an increase in social security costs of £200,000 a week and, ironically, a reduction in corporation tax receipts to the Exchequer of 28 per cent., or £10 million a year, from amusement arcades and operators alone.
I shall finish on this point—[HON. MEMBERS: "Hear, hear."] Hon. Members may be anticipating a maiden speech, but surely they are not anticipating it that much. I happen to think that the proposal to impose an amusement machine licence duty was brought about in an environment significantly changed by the advent of the national lottery. Although the Government may wish to pass enabling legislation in the Finance Bill allowing them to impose that licence duty, I urge them not to impose the duty until they have had an opportunity to consider proposals put forward by the British Amusement Catering Trades Association and the British Association of Leisure Parks, Piers and Attractions to mitigate the effects of that tax on an industry that has a significant effect on employment in my constituency.

Mr. Ian Pearson: It is with great pleasure that I make my maiden speech to the House as the new Member for Dudley, West.
I begin by paying a generous tribute to my predecessor, the late Dr. John Blackburn. A man of great charm and courage, he radiated warmth and was popular and widely respected both within the House and throughout the constituency, where he was an energetic and effective Member of Parliament in dealing with constituents' problems. It is with a deep sense of responsibility that I succeed him in the task of representing the seat where I was born and have lived for most of my life.
Dudley, West is situated on the western fringe of the west midlands. It contains a number of small towns and villages, including Sedgley, an old market town that was once part of the Norman barony of Dudley; Kingswinford where I grew up, which dates back to the Domesday book; and Wallheath and Wordsley. They all border on the green belt and rural fringe of south Staffordshire.
The seat has changed radically over the 20 years since a Labour Member of Parliament was last returned to the constituency. Its population has grown enormously, with new housing developments, particularly in Amblecote and Gornal. Now, three quarters of those who live in the constituency own their own homes. Industrially, too, the seat has changed dramatically. The past 20 years have seen the closure of the steel industry and allied trades in Brierley Hill, Brockmoor and Pensnett. Recently, we have seen the growth of Merry Hill, a major retail and leisure complex. It is one of the biggest shopping centres in western Europe, with more than 2.5 miles of marbled malls attracting 23.5 million visitors a year. That prime retail site is more profitable than Oxford street. The area still produces the finest cut-glass crystal in the world and has some of the best pubs and beers to be found anywhere. My constituency has a strong and proud manufacturing tradition, with more than 2,500 small businesses, many of which are in specialist engineering and serve the motor industry.
The people of Dudley, West are practical, hard-working, open and honest. They keep their promises and expect others to keep theirs. On 15 December they spoke for the nation. In massive numbers, they voted against a Government who they believe have lied to them and betrayed them and are completely out of touch, and for a Labour party which they know is more in tune with their needs and aspirations and is developing a growing bond of trust and confidence with the British people.
My principal reason for speaking, however, is not to report the strength of feeling in Dudley, West about VAT on fuel, broken promises and the growing appeal of new Labour—the poll result amply demonstrates that. It is that my background is in business finance and economic development. Until I joined the House, I was closely involved in helping small and medium-sized businesses to grow, and in helping local and regional economic developments to increase jobs, improve skills and raise prosperity.
A burning issue in Dudley, West is the devastating impact of Merry Hill's success on town and village centres within my constituency and the neighbouring constituencies represented by my right hon. Friend the Member for Dudley, East (Dr. Gilbert) and the hon. Member for Halesowen and Stourbridge (Mr. Hawksley). The seriousness of the problem is widely recognised and has produced a major change in ministerial guidance on out-of-town retail development. Nothing has been done, however, to alleviate the problems. Merry Hill's success owes as much to tax incentives for the site's development as to anything else, although I freely acknowledge the vision and entrepreneurial endeavour of the private developers who got the project off the ground. I want the affected centres in Dudley borough to be given special status in an amendment to a clause in the Finance Bill so that they can benefit from a package of tax reliefs and allowances similar to those on offer to Merry Hill when the site was developed. That would be natural justice.
More broadly, there is significant scope for a more imaginative use of tax breaks in funding economic and infrastructure development. Tax breaks should be designed to attract institutional funding support and provide support for public-private partnership development through the issue of regeneration and renaissance bonds. The Budget has missed an opportunity to develop that possibility and the private finance initiative is singularly lacking in that respect.
As a champion of small and medium-sized businesses, I welcome the purpose behind the establishment of venture capital trusts. My experience in the venture capital industry leads me to suspect that the Government's figures on the amount of funds that will be generated from it are highly ambitious, to say the least. I share the concerns and scepticism of my hon. Friend the Member for Oxford, East (Mr. Smith) that the scheme may degenerate into a tax avoidance mechanism for the very rich and produce no real benefit for businesses. That must not be allowed to happen. Neither VCTs nor business angels schemes—I presume that they are given greater support—will solve the problem of the equity gap that still exists. Nor is there an effective support programme for the vast majority of small and medium-sized businesses that do not want to go down the equity route but want to develop, grow and thrive.
The Government have a major role to play in assisting companies to upgrade the sources of their competitive advantage. That is not to deny the role of the market, but our country should provide at least the same level of support for our businesses as that offered by other regional and national Governments.
In the west midlands, our future prosperity is linked to the fortunes of the motor industry. We compete head to head with Baden-Württemberg in Germany and

Emilia-Romagna in Italy. We have had significant successes, but the simple fact is that the support available in other regions of Europe for businesses is far ahead of what we can offer in the west midlands. We can, and must, do better to provide such support if we are to compete successfully in future European and world markets. Providing tax relief to defray research and development costs of small companies is one mechanism of merit that should be discussed further in the House, but much more is needed.
For a long time, I have been impressed by the way in which the German Government have supported growing businesses through the Kreditanstalt für Wiederaufbau. There is a strong case for establishing and supporting regionally based business development banks and institutions in our country which could offer patient, long-term loan finance to companies. That matter should be considered in the Committee considering the Bill.
I have been able to touch on only one or two issues relating to small businesses that are the lifeblood of Dudley, West's economy, just as they are vital to the future of Britain as an industrial and trading nation. I believe that it is not the purpose of a maiden speech to go into significant detail, but I would welcome an opportunity to expand on those issues and themes in more detail at a later date.
I know that it is customary for a maiden speech to be heard in silence. I have been warned, however, that I cannot expect similar treatment ever again. I thank hon. Members for their courtesy this evening.

Mr. John Townend: It is always a great pleasure and a privilege to follow a maiden speaker. I congratulate the hon. Member for Dudley, West (Mr. Pearson) on his excellent maiden speech. I am sure that we will hear a lot more from him in future years.
The hon. Gentleman has clearly had a significant effect on the Opposition Benches, because as one who has attended practically every debate on a Finance Bill in the past 15 years, I can tell him that at 6.31 pm there would normally be just five Opposition Members present. [Interruption.] I have to admit that, normally, there would not be all that many of my hon. Friends on the Conservative Benches, either. [Interruption.]

Madam Deputy Speaker: Order. Will those who are going out of the Chamber go quietly? Those who remain should also be quiet.

Mr. Townend: My right hon and hon. Friends and I are very grateful to the hon. Member for Dudley, West for his kind remarks about his predecessor, Dr. John Blackburn. He was extremely popular on both sides of the House. Even though he was older than me, he would often address me as father or uncle.
I believe that Madam Speaker must have done a lot of research when she put my name following that of our new colleague, the hon. Member for Dudley, West, on the list of speakers, because we have an awful lot in common. He has already told the House that he represents a seat in the area in which he was brought up and that he is a local Member of Parliament. I, too, represent an area of east Yorkshire in which I have lived all my life. There are not too many other hon. Members who can claim to be true


local Members of Parliament. It is a great advantage to represent the area in which one has lived all one's life, as the hon. Gentleman will discover over the years.
The hon. Member for Dudley, West also spoke about his interest in public houses and beers, and the House is well aware of my long-standing interest in the alcohol industry. I am sure that the hon. Member for Gordon (Mr. Bruce) would join me in welcoming the hon. Gentleman to the lobby which is trying to persuade the Government to give the brewing industry a level playing field in Europe.
In common with the hon. Member for Dudley, West, my occupation was in business finance. I started off as a chartered accountant and you said that one of your main interests—

Madam Deputy Speaker: Order. Not the Deputy Speaker, but the hon. Member for Dudley, West (Mr. Pearson).

Mr. Townend: The hon. Member for Dudley, West said that his main interest was small businesses and he raised some relevant provisions in the Finance Bill which concern such businesses. I am also involved in small businesses.
The hon. Gentleman has had a famous victory and we should not take that away from him. He follows a long line of hon. Members who also enjoyed famous by-election victories but who were not with us for too long. When we regain that seat, however, I hope that, in due course, the hon. Member will find a real safe Labour seat. I wish him well in his parliamentary career. I am sure that he has a valuable contribution to make. His experience in the business world in particular will be extremely valuable to his party, which is not well endowed with people experienced in business and, in particular, small businesses.
I had the privilege to be called to speak during the debate on the Budget, when I spoke at some length about the excellent performance of our economy in the past year and the Government's enormous successes. They have been mentioned in some detail by my hon. Friend the Member for Milton Keynes, South-West (Mr. Legg). With inflation at a low level, unemployment falling month by month, a recovery that has surprised everyone by being export led, the balance of payments deficit falling month by month, the Budget deficit falling faster than expected and investment and productivity rates rising, the performance of the British economy in the past year has been the best that I can remember. On the economic front, the Achilles' heel of the Government is spending and taxation—my right hon. and hon. Friends will not be surprised to hear that.
The size of the Finance Bill—it comprises 348 pages and contains 144 clauses and 29 schedules—suggests that my dear friends and colleagues at the Treasury have not yet got a grip on the Inland Revenue. We are supposed to be the party of deregulation; as such, there is absolutely no need to have a massive Finance Bill year after year, Bills that make our tax legislation more and more complicated. Whenever the Government come up with a good idea to encourage investment or to encourage business, the Revenue is so obsessed with tax avoidance that it hedges the idea around with so many qualifications, which run into hundreds of clauses and subsections, that no one can understand it. The purpose of a good proposition is, if not lost altogether, certainly weakened.

The Opposition talk about tax avoidance and how they would increase the tax yield, but how they can criticise the Government, when, year after year, they produce a Finance Bill of this size, I do not know.
In the debate on the Budget I spoke at some length on the economy in general and tonight I would like to deal with one or two of the Bill's provisions that affect my constituency. My hon. Friend the Member for Wyre Forest (Mr. Coombs) has already raised one of them—tax on amusement arcade machines. As right hon. and hon. Friends will know, I represent three tourist and holiday towns—Bridlington, Hornsea and Withernsea—in which there are a considerable number of amusement arcades and operators. I have to say again that I think that those proposals have come from the Inland Revenue, and have not been especially well thought out.
I am especially interested in the comment of the Paymaster General, in a letter which he wrote to me, that
Government policy, as stated by the Chancellor, is to widen the tax base where sensible rather than increase the rate of individual taxes, or raise the rate of income tax.
I do not object to that in principle, but that is not the only choice. There is another, and that is not to widen the tax base, not to increase taxes at all, but to control and reduce public spending. I ask my right hon. and hon. Friends to consider that matter again. Even if they insist on obtaining that yield, it can be done more cost-effectively.
I have had a long telephone conversation with, and a letter from, a distraught constituent who is a small business man. He tells me that, if the proposals are passed unamended, he will be out of business. He takes only about £8,000 a year out of his small, one-man business. He operates single-site machines, which he lets, and he shares the stakes with the site owner. The new tax will cost him £8,000 a year. The tax on a two-operator machine will cost £500 a year, or £10 a week, while that on a one-operator machine will cost £250 a year.
If the measure is passed unamended, many of those machines will be withdrawn, so the Government will receive no income. As my hon. Friend the Member for Wyre Forest said, the resulting loss in corporation tax, the increase in the costs of unemployment pay and social security to the people who lose their jobs and the loss in national health insurance contributions and pay-as-you-earn taxation makes one seriously wonder whether it is worth the candle.
The British Amusement Catering Trades Association has made some interesting proposals which would ensure that most of the yield that it is hoped the changes will produce will be achieved by another means. It proposes to decrease the rate on those machines to £100 and to introduce a new band of tax on the all-cash pay-out machines. I strongly urge my right hon. and hon. Friends to consider those proposals carefully.
I also urge my right hon. and hon. Friends, when they are preparing next year's Budget, to tell Customs and Excise and the Inland Revenue that there will be no further new taxes.
Another matter, which affects my rural constituency, is the proposal to end the present concession, which has been in force for many years, that vehicle excise duties should be exempted for owners of vehicles that are used for short journeys of up to six miles a week on public highways between different parts of land that those same people occupy. Many agricultural holdings have parcels


of land that are geographically close to one another but not integrated within a ring fence, and many more have contiguous parcels of land that are bisected by public roads. People need to cross the road simply to move a tractor from one side to the other.
Under paragraph 2(h) of schedule 4 to the Bill, that exemption will be abolished. I do not know how much money will be gained as a result, but it seems to me that it is not a very sensible proposition, because such a road will be used only for very small distances, for convenience. That places another burden on agriculture. The measure will be especially burdensome to small farmers—and the Conservative party is the party that believes in and supports small businesses. I think that someone in the Department must have been trawling around, asking, "Where can we find an extra burden to put on various people?"
I trust that the present Finance Bill will be the last one in the present Parliament under which the overall burden of taxation will increase. From now on, taxation must be reduced, but that must be coupled with fiscal rectitude. The Government must adhere to the programme, which they have set out clearly in the Red Book, to reduce the public sector deficit. There must be no weakening on that.
I have stood in the Chamber year after year and said the same thing, and I say it now to my right hon. and hon. Friends: public spending at 42 per cent. of gross domestic product is far too much, and we should be ashamed of that level. However, the deficit may be reducing more quickly because revenues are increasing faster than forecast in the Red Book. If we succeed in reducing taxes—I think that we shall—we shall not put the future of the economy at risk if we reduce spending by an equivalent amount; there will be no effect on the fiscal stance.
If my right hon. and hon. Friends go out into the country to listen to what people are saying, they will discover that the great dissatisfaction with the Conservative party at the moment, as expressed in the by-election that brought the hon. Member for Dudley, West to the House, has nothing to do with disputes about Europe; the dissatisfaction is about crime, law and order and the way that people feel about the money in their pockets. Therefore, we should take no notice of the hon. Member for Gordon, who said that, at the next Budget, the Government should be very careful about cutting taxation. Of course he would say that, because he wants the Government to lose the next election.
We now have the platform and, if the Government do what they should do in the next year—if they do what their supporters want them to do—they will squeeze public spending sufficiently to give themselves ample resources to reduce taxes. That must be our first priority.
If anyone believes what the public opinion polls are trying to say—that the majority of people now believe that a Labour Government would deliver lower taxes than a Conservative Government—he or she is in cloud cuckoo land. Does anyone seriously believe that Labour Members, if they were ever to sit on the Government Benches, would make proposals to reduce spending? Does anyone believe that they would make proposals to reduce taxation? Every Labour Government have taxed more at the end of the Parliament than they did at the beginning.
It is the Conservatives' failure to live up to our reputation as the party of low taxation—our failure, as far as publicity goes—that has allowed people to start to believe that, in the words of my hon. Friend the Member for Welwyn Hatfield (Mr. Evans), "that lot over there" would spend less and tax less. They are in cloud cuckoo land.
I also wish to comment on the Opposition Members who continually claim that so much money can be saved for the Exchequer by closing loopholes. They do not mean closing loopholes; they mean closing concessions, so let everyone beware. [Interruption.] Yes; they mean closing concessions, such as the concession on inheritance tax that the Government introduced which allows family farms to go from father to son, and the concession that the Government introduced which allows family businesses to be carried on to the next generation, provided members of the next generation carry on the business and work in it.
Let the public beware: when the Opposition speak about ending concessions, they will hit the farmers—the small farmers, the family farmers. Let the farmers' sons know that the family farm might not go to them if the Labour party comes to power. Labour will hit the small businesses that the hon. Member for Dudley, West said that he had come to the House to represent. Those are the concessions that the Opposition want to do away with. We curtail avoidance methods every year when we bring forward the great bible—the Finance Bill. If Opposition Members can give good examples of tax avoidance that should be stopped, I am sure that my right hon. and hon. Friends will be only too pleased to know about them.

Mr. Brian Sedgemore: Now try to be coherent.

Madam Deputy Speaker: Order. I do not think that the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) was in his place when I made some observations about sedentary interruptions, so I shall repeat my comment: I deplore them.

Mr. Townend: I am sure that the hon. Gentleman, whom I have always considered to be a friend, would like to withdraw his remark, Madam Deputy Speaker. I served for many years on the Treasury and Civil Service Select Committee and I.always found the hon. Gentleman to be reasonable—the adjective which he used could be used of him, particularly when he was questioning a former Chancellor of the Exchequer.
I support one of my hon. Friends who said that next year, when we consider how to disburse the great treasure that we have saved by cutting public expenditure and give people back their money, we should look carefully at capital gains tax. With a minimum of expenditure we could simplify what has become a not very productive and complicated tax. It is so complicated and yields so little that I respectfully suggest that it might be a good idea to think of abolishing a tax every Budget, as we used to do some years ago.
As I said when we debated the Budget, I support the broad thrust of this year's Budget and the Finance Bill. I have every confidence that, as the year continues, the faces of the Opposition will become bleaker and bleaker as the recovery continues, the population feels better and better, unemployment continues to decrease, the budget deficit continues to fall and the balance of payments


moves into surplus. We shall deal with our Achilles' heel and at the next Budget we shall start a continuous programme of reducing taxation.

Mr. Giles Radice: First, I pay tribute to my hon. Friend the Member for Dudley, West (Mr. Pearson), who made an extremely confident and fluent maiden speech. I congratulate him on paying such a warm tribute to his predecessor and on his knowledge of his constituency, particularly the pubs and beer. It is clear that he will bring expertise to our debates. His speech showed a great knowledge of small businesses and what can be done to help them. I look forward to hearing what he has to say in future debates. I have no doubt that he would be an extremely good candidate for the Finance Bill Committee—a fate worse than death which perhaps I should not wish on him.
I shall devote most of my remarks to the Select Committee report on the Budget, which it is customary for us to consider on Second Reading of the Finance Bill. However, I shall first comment on the remarks of the Chancellor who, in a typically low key and modest way, said:
I come before a Select Committee which will find it extremely difficult to ask any kind of critical questions on the macro-economy.
We also had some remarks in that vein from the hon. Members for Bridlington (Mr. Townend) and for Stamford and Spalding (Mr. Davies). It is true that there are some good signs about the economy. There is an economic recovery after the longest recession since the war. Inflation is still low and the balance of payments is improving, especially on exports. There are, however, a number of qualifications to be made.
Some of the recovery does not have much to do with the Government. There was a devaluation, which is not often mentioned. As a supporter of the exchange rate mechanism, I have to acknowledge that. Fortunately, I have a good alibi as it was I who coined the phrase that we entered the exchange rate mechanism
at the wrong time, for the wrong reasons, at the wrong rate."—[Official Report, 15 October 1990; Vol. 177, c. 937.]
I said that on the day that it was announced to the House of Commons that we had entered the ERM. Fortunately, my remarks were reported in the House, so I have an alibi. Some Conservative Members do not. We owe much of our success in exports to the fact that we devalued. As the report shows, that has been the main motor of our recovery, but it is not often mentioned by Ministers and certainly not by the Chancellor of the Exchequer.
We do not often hear about the fact that, as a consequence of the two recessions, we still have a small manufacturing base and do not have enough capacity in the economy. The nature of the recovery means that there is not a feel-good factor. There have been cuts in living standards and many people, particularly in the south, are suffering from negative equity as a consequence of the crash in the housing market.
Having been in the House for some time and having heard successive Chancellors make grand statements about the economy, I warn that the use of hyperbole on the British economy has an extremely bad track record. We all remember the economic miracles associated with the 1980s—the boasts of Mrs. Thatcher, Lord Lawson and even the present Prime Minister. I remember the Prime

Minister's speech just before we entered the longest recession since the war. A certain amount of humility from Ministers on the subject of the British economy would be in order. We all know that improving the British economy is a long, hard road and there are no short cuts. My hon. Friends are right to say that long-term investment in education and training and in research and development is important, but it takes time and there are no easy answers.
I wish to concentrate the rest of my speech on the subject of tax cuts. It is clear from the speeches of the hon. Members for Bridlington and for Milton Keynes, South-West (Mr. Legg) that Conservative Back Benchers and those who voted for the Conservative party at the last election very much want to hear about tax cuts. In our report, we warned the Chancellor about the dangers of making tax cuts. Everyone in the House understands the attraction of cutting taxes. Even at the best of times our constituents are not wildly enthusiastic about paying taxes.
It is part of Conservative mythology that the 1992 election was won on the promise to cut taxes. Following the tax-increasing Budgets of 1993, the Opposition are entirely justified in throwing that promise back in the Conservatives' faces. The Dudley, West by-election was basically won on the back of those broken promises and the fact that the Conservative party promised to reduce taxes and then did not do so. Instead, the Government increased taxes by the largest amount in one single year—as everyone now knows.
We have just heard from the hon. Member for Bridlington that the Chancellor is under great pressure from many of his supporters to cut taxes as soon as possible, preferably in the 1995 Budget. It is clear why they want him to do that: they hope that it will restore their political fortunes. The question that my Labour colleagues and I put to witnesses at the Select Committee hearings—to the Government's economic adviser, the Governor of the Bank of England and the Chancellor—was if and when it would be economically and not just politically justified to cut taxes. Their answers are of some interest to the House.
The Government's economic adviser, Mr. Alan Budd, saw two reasons why it might be unwise to cut taxes: if such action threatened sound public finances—to be fair, the hon. Member for Bridlington also mentioned that point—and if the economy was at or above its full capacity. When asked the same question, the Governor of the Bank of England agreed that tax cuts could be inflationary if the economy was overheated or was growing above capacity. In answer to the question from my hon. Friend the Member for Warwickshire, North (Mr. O'Brien), he also said that if tax cuts were made at a time when the economy was overheating he would have to consider his advice to the Chancellor on the subject of increasing interest rates.
Not surprisingly, the Chancellor was less forthcoming in answer to our questions about tax cuts. He agreed—as he had to, because his economic adviser had just said it—that as well as the state of public finances he would have to consider the overall state of the economy before cutting taxes. He assured the Committee and the general public that he would not take risks with inflation, but he said little more; he has certainly not discouraged his


supporters, such as the chairman of the Conservative Back-Bench committee, from assuring Conservatives that, come the next Budget, the Government will cut taxes.

Mr. John Townend: I am obliged to the hon. Gentleman for giving way. While cutting taxes in isolation could be dangerous for the economy, will the hon. Gentleman accept that if the tax cuts were balanced by spending cuts—if it were fiscally neutral—there would not be the same danger?

Mr. Radice: It would depend on the economic situation at the time. One would also have to consider the underlying economic situation, as Alan Budd told the Committee.
In considering the economic wisdom of tax cuts, the key issue is the extent of spare capacity in the economy—an issue on which we did not receive any clear answers. Last year the economy grew well above the so-called trend growth rate. Economic growth was 4 per cent., but the Treasury estimates the trend growth rate in the economy at between 2 and 2.5 per cent., which is about the growth rate that the economy has achieved in the past 10, 15 or 20 years. How long the economy will continue to grow above trend without overheating depends on how much spare capacity exists and whether there have been the supply side improvements about which Ministers and Government Members always boast but of which there is little hard evidence. The jury is still out on that question.
With regard to capacity, the chief economic adviser told us that the output gap is anything between 1 per cent. and 4 per cent.—in other words, he does not really know. However, most advisers were sceptical about the size of the output gap despite the long recession. For example, Mr. Gavyn Davies told us that he is now seeing a sharp tightening in the labour market. Mr. Christopher Johnson talked about the risk of inflationary pressures, while Mr. Andrew Brittan, who has a Keynesian reputation, said that much of the capacity which one might imagine would be present in the economy was lost during the recession. Therefore, he said, the economy could grow above trend for only a couple more years at the most.
The Select Committee concluded in its report that in view of the dangers of overheating, and given that we did not know how much spare capacity was left in the economy, it was correct to be cautious about the amount of spare capacity remaining and about the circumstances in which tax cuts would be justified economically. In his written evidence to the Committee, Christopher Johnson pointed out that the idea that taxes are being increased in this fiscal year only to be lowered in the following year
seems like a pointless 'Duke of York' exercise, marching the troops up the hill only to march them down again".
One does not have to look at the crystal ball when one can read the book. There is a recent example of a Tory Chancellor cutting taxes when the economy was overheating and I am sure that the hon. Member for Bridlington remembers it very well. In March 1988 Nigel Lawson gave away £6 billion in a full year when inflationary pressures were already very strong. Partly as a consequence of that Budget, the economy went out of balance, interest rates had to be raised to record levels in order to balance it again, and the country suffered a prolonged recession from which we are only now recovering.
In his Budget speech, the present Chancellor told the House:
Those who bask in their short-term popularity and neglect the need for sound economic measures will live to rue the day hereafter."—[Official Report, 29 November 1994; Vol. 250, c. 1080.]
He should heed his own advice with respect to tax cuts.

Mrs. Jacqui Lait: I am grateful to be able to take part in the debate as I have been privileged to speak in the two previous debates on the Budget, when I concentrated on an issue which is of particular interest to my constituency—the illegal importation of tobacco and alcohol products.
The House will be pleased to hear that I do not intend to spend too much time repeating those arguments today, although my commitment to solving the problem by approximating—I use the word "approximating" and not "harmonising"—duties throughout the European Union remains as strong as ever. I will continue to encourage Treasury Ministers and others to make sure that Ministers in other countries are aware of the health implications of the illegal importation of cheap tobacco and alcohol, its effect on the rule of law and on Government revenues, and the costs of trying to prevent the smuggling of those products.
Apart from that constituency point, I wish to address some broader issues, many of which have been mentioned already. I do not wish to repeat what has been said already, but I should like to pick up some of the points made by the hon. Member for Durham, North (Mr. Radice). I am always fascinated by the debate on spare capacity as I am never sure exactly what "spare capacity" means, although one has an instant vision of empty and rusting factories and of many people in long-term unemployment.
I believe that the fundamental problem of spare capacity is access to capital. If the pound is strong—as it is now—if there is a great deal of inward investment in the economy and, because of the expertise of the City and its international role, there is access to international capital at very competitive interest rates, it seems to me that capacity is limited only by our access to capital and our ability and desire to borrow it.
We can always build factories. Modern technological developments mean that factories are no longer the huge, acre-gobbling monsters that they once were. We can compare today's factories with the original Longbridge site, the memorable Rootes in Linwood and the old ICI at Teesside. Today smaller, much more efficient plants produce many more goods. We have to erase old-fashioned attitudes about production and manufacturing.
We must ensure, as the Government have, that we are able to access capital at a price that we can afford to pay. The key to achieving that aim is keeping down the inflation rate. One of the benefits of controlling inflation is the elimination of the short-termism that has plagued our country for the past 40 to 50 years, when investors could not rely on the fact that the pound would be worth exactly the same amount in two years' time as it was on the day they made their investment. If people cannot believe that their investments will retain their worth, they want high returns as compensation for that risk. If the pound is steady, our investments will become much more


attractive and we can build in long-term investment opportunities. That makes it a much more sensible proposition to invest long term, not just for the teenage scribblers in the City, but for those who are producing the wealth of the country. That will help our productive capacity enormously. The key to the Budget lies in our determination to keep inflation down and the pound stable.
Other advantages flow from having a stable pound. We shall be able to develop the international competitiveness of our goods and services. When we talk about inflationary pressures, we have to ask where they came from. One source is increased input costs, but one of the most significant factors in output costs is the cost of labour. We shall be forced to keep our labour costs low because we are competing in an international market, trying to match the output of factories in the tiger economies of Asia and the highly skilled, highly educated and appallingly underpaid work force in eastern Europe. Those are our competitors. It has nothing to do with Germany, France or Italy. The wage rates in countries such as those in eastern Europe and Asia will be the principal motors of our costs in terms of competitive production. That is why we shall continue to invest in industry, looking towards the high-tech industries and the development of the brain and intelligence skills required to compete. Keeping inflation low and a strong pound are the keys to achieving that.
I particularly support the development of venture capital that will provide investment in the smaller companies, which will be the real powerhouse of our recovery. I very much welcome the Budget proposals to help people wishing to invest venture capital. Those in high-tech businesses have long complained that they cannot get access to capital between £50,000 and £500,000. I hope that the venture capital trusts, which will allow people to invest and will reward them for investing, will be lean and mean enough to dodge the criticism from the larger venture capitalists, the banks and everyone else whose job it is to invest, that it costs just as much to invest £50,000 in a venture as it does to invest £1 million. We have to ensure that the venture capital trusts are sufficiently lean and mean to afford small investments as well as large ones. By encouraging venture capital trusts to be set up and encouraging the small investor who wants part of the action in venture capital, we shall have the potential to help those small businesses which so desperately need small loans.
Venture capital will also encourage small businesses to start looking at equity facilities instead of overdraft and loan facilities. It is not just the City which needs to be sophisticated—so do people running businesses who hope in the long run to make not just their own fortunes, but several other people's fortunes as well.
I come now to a national issue which is also particularly apposite in Hastings, where we have always had endemic long-term unemployment. I welcome the measures in the Budget to encourage employers to take on more of the long-term unemployed, but I should like to explore a slight tweak to the suggestion that employers get a national insurance holiday for employing the long-term unemployed. In principle, that is a very good idea, but the Confederation of British Industry conducted a survey of long-term unemployed people and one of its most significant findings was that 40 per cent. of those people are illiterate. With the best will in the world, no employer

will take on an illiterate person for the value of his national insurance. Perhaps the Treasury might like to consider a pilot scheme to see how successful the national insurance holiday could be for the long-term unemployed and for employers. It may be possible to get that up and running before the measure is introduced more generally. If 40 per cent. of the long-term unemployed are illiterate, more help is required for them than a national insurance holiday for employers.
I come to another constituency issue that has been raised by a number of hon. Members. Hastings is a coastal town with significant tourist business. Like other hon. Members, I have been approached and lobbied by those running coastal amusements and leisure parks. One company has calculated that, net of VAT, the average weekly take in video games is £10. In the cranes, redemption and novelty category it is £62.93, and for kiddies' rides it is about £4.23. Those figures give us an idea of the problem faced by people who are trying to turn piers into places for family entertainment and who do not wish to replace everything by machines with money-only prizes. They do not wish to replace all the games of skill or competition with prize-only machines. It is in their interests if perhaps the Treasury could rethink and even take on board the BACTA recommendations.
Finally, because my area has a very mixed constituency, I will pick up on vehicle excise duty on farm vehicles, which was mentioned by my hon. Friend the Member for Bridlington (Mr. Townend). It will hit some of the farming community quite hard. Many of ray farmers have land in different parts of a village. They need to travel on the roads and they are hard hit by the new measure.
We have a sheep farming community in Hastings. The sheep farmers are in a state of flux and ferment for all sorts of extraneous reasons and it would help if we were more sympathetic to them than imposing excise duty on their vehicles. One suggestion from a local farmer is that perhaps farmers could apply for a licence at a higher rate than currently applies, but which could be used in the same way as licences are used by garages so that they could transfer one licences from machine to machine. They would be prepared to do that. They insist on having their machines roadworthy and they are happy and proud for them to go on the roads, but if each machine has to be licensed separately it will put exceedingly great pressure on people who already feel pressured, particularly in my part of the world.
I commend the bulk of the Finance Bill—it certainly is bulky—and hope very much that the Treasury will take on some of the points that I and many of my hon. Friends are making.

Mr. Alan Milburn: Notwithstanding the last rather more critical remarks by the hon. Member for Hastings and Rye (Mrs. Lait), she painted a fairly rosy picture of prospects for the British economy during the next few years. It is probably a picture that many of our constituents would not recognise. Some 11 million of them—that is 40 per cent. of the work force—have experienced unemployment during the past five years.
Not surprisingly, many commentators, including Opposition Members, view the Finance Bill as a measure that promises much but delivers very little indeed, notwithstanding its considerable bulk. It will do nothing


to tackle the underlying sense of insecurity that is prevalent in many of our communities, and will do little to build the partnership economy that right hon. and hon. Members in all parts of the House espouse—high investment, growth and, most importantly, employment. Some of the Budget's central measures will undermine the attainment of those objectives. It entrenches a Britain of double standards and unfairness.
The Budget does nothing to put into reverse the failures of Conservative practices over the past 16 years. I noticed from earlier contributions that some Conservative Members are apparently getting cold feet about the approach taken in the past few years. Last year, I read the interesting economic lecture given by the current Secretary of State for National Heritage, in which he criticised the free market approach adopted in the late 1980s, which he said had been built on sand and led directly to the recessionary consequences that many of our constituents are suffering.
Earlier, the hon. Member for Milton Keynes, South-West (Mr. Legg) spoke of the failures of the period when Lord Lawson was in charge of economic policy. The hon. Gentleman might have added that the current Prime Minister was at that time Chief Secretary to the Treasury and is equally responsible for the mess in which the British economy now finds itself.
During the past decade, the Government have been responsible for low investment, inadequate training, unacceptably high unemployment and, to cap it all, unfair taxation—that from a party that promised year after year, election after election, low taxation. The Conservatives have provided no long-term growth, mismanaged public finances and broken their promises. The dogma that the free market is king has produced a United Kingdom ravaged by decline, division and increasing doubts among the electorate.
When Conservative Members talk about their party being the party of financial rectitude and able economic management, they ignore the evidence of their own eyes. The past few years have been disastrous for the British economy and for the British people.
Although recent falls in official unemployment, low inflation and some evidence of short-term growth are welcome, there is no proof that Britain has secured a permanently high level of sustainable economic expansion. Continuing low manufacturing investment and its decline in the past few quarters, falling employment paralleled by falling unemployment, the emergence even now of the beginning of skill shortages, and evidence of inflationary pressures, give little ground for hope that the recovery will be sustainable at the rate that Britain needs to make good the ravages of the past recession—let alone to put it on the road to full employment.
The Finance Bill should have been geared to creating new job opportunities. Instead, it demonstrates total complacency towards the unemployment confronting 2.5 million of our constituents—1 million of them are suffering long-term unemployment. The number of very long-term unemployed, who have been out of work for two years or longer, is increasing and higher than two years ago.
One of the Chancellor's central measures—the national insurance holiday to encourage employers to recruit the long-term unemployed—does not even warrant a mention

in the Bill, and neither will it be introduced this year. The long-term unemployed must wait until April 1996 before that measure takes effect. I hope that the Financial Secretary will answer this simple question when he winds up. What is the reason for that delay? If that measure is so central to Government objectives and to tackling the problems of the underclass that the Chancellor described in his Budget speech, why not introduce it now, or at least during this year? Why wait until April 1996? The unemployed need help now.
A massive waste of talents, resources and skills is inherent in unemployment, but of equal importance is that it costs the taxpayer a pretty penny. The former Secretary of State for Employment, now Secretary of State for Education, told the Employment Select Committee a year ago that it costs £9,000 a year to keep each unemployed person out of work. Every family in the country pays £1,000 a year towards the cost of unemployment—and that, to coin a famous phrase, is not a price worth paying. It has divisive social consequences, which are to be seen in all our constituencies. Increasingly today, we see not just one generation but families in which successive generations have been out of work, which contributes to increasing inequality and growing poverty.
For the first time this century, the gap between the rich and the poor is widening, not narrowing. One great achievement of politicians in all parts of the House in the 20th century has been the narrowing of social inequalities—until now. Today, those inequalities are growing. Sixty-eight per cent. of the work force earn less than the Council of Europe's decency threshold, and their numbers have grown by 1 million during the Tory years.
A low-skill, low-wage, no-hope economy is no future for my constituents or those of Conservative Members. When one considers that 1 million people in work are in such desperate straits that they must take a second job to make ends meet, one wonders what sort of country we are living in. The Government must take action to narrow the gap between the rich and the poor, produce a system of fair taxation and ensure that skills training is available to our unemployed constituents.
It is little wonder that there is such a sense of insecurity, even among people in work. For example, home owners face additional monthly bills of £50 on average thanks to Government policy, increased interest rates and negative equity. To heap insult on injury, home owners who become unemployed are to be stripped of their right to housing benefit. It is regrettable that that measure—one of the most important to be announced in the Budget—is also missing from the annual Finance Bill. I hope that the Minister will address that issue in his winding-up speech.
Many of the people who will suffer most grievously as a consequence of their loss of benefit when they become unemployed are precisely those whom the Conservative party claims to represent: small business men and women and the self-employed. How on earth will they take out insurance? What sort of price will they end up paying on their insurance premiums to insure themselves against the risk of being thrown out of work?
Mr. John Maples has become a friend of the Labour party during the past few months. He has become our friend because he managed to tell the truth. He said in his famous leaked memo:
While we trumpet the recovery, the voters do not think the recession has ended. They still fear unemployment, have no more 'money in their pocket' etc. What we are saying is completely at odds with their experience.
He was right. He was right to say that living standards will not only fall this year, but will go on falling next year. It is not surprising that there is an absence of a feel-good factor.

The Financial Secretary to the Treasury (Sir George Young): indicated dissent.

Mr. Milburn: The right hon. Gentleman shakes his head. He should say so directly to the vice-chairman of the Conservative party, because there it is in the Maples memorandum. Advice is offered directly to Ministers and, indeed, to the Prime Minister, to tell the truth, and make it clear that living standards are falling and that there is a growing sense of insecurity in all our communities. Perhaps most important of all, the increased tax burden that has been promulgated in successive Finance Bills is now beginning to bite, and beginning to bite hard.
The extra taxes that have been introduced will mean that the net income of a typical taxpayer will be some £13.15 a week lower in April 1995 than a year earlier and £20.50 a week lower by April 1996.

Sir George Young: We keep on hearing figures about the ave`rage family or the average household. The figures that the hon. Gentleman has just quoted apply to less than 1 per cent. of households. The figure for average households is £2.30 per week.

Mr. Milburn: At least the Minister has the good grace to admit that the average family will feel the effect of tax rises and of economic failure where it hurts most—in their pockets. However, one thing is absolutely clear. The electorate understand that not only are tax bills rising but, as a deliberate matter of policy, the Conservative party is pursuing a policy of unfair taxation.
In 1979, when the poorest fifth of households paid 31 per cent. of their incomes in tax, the richest fifth paid 38 per cent. By 1992, the last year for which figures are available, and incidentally, even before the big tax hikes that we have seen, the tax burden had shifted from the rich to the poor. The poorest fifth of households paid 39 per cent. of their incomes in tax compared with 34 per cent. paid by the richest fifth.
All that takes place against a background of rising public anger about perks for those at the very top. We have heard much recently about the excessive boardroom salaries and perks that have been paid out, especially across the privatised utilities. To remind the House, 50 directors of the privatised utilities have already made more than £1 million out of privatisation. Since privatisation, chairmen of utilities have seen their salaries increase by an average of 220 per cent. But that is nothing to the chairman of BT, because his salary has increased by 700 per cent. At the same time, of course, more than 160,000 jobs have been lost since privatisation began.
The Finance Bill offered Ministers an opportunity to put their money where their mouths were. It offered the Government the chance to advance a fairness agenda; to tackle those excessive rises in salaries and perks for those

serving in the boardrooms of the privatised utilities. Yet there is nothing in this Bill about such an approach. That is why my hon. Friends on the Front Bench will table amendments about executive share options and about regulators being required to disregard the costs of excessive executive remuneration when setting price ceilings in the privatised utilities.
The Government's failure to act has obviously incurred a huge political cost. John Maples again made it very clear when he said:
Although in the 1980s the Conservatives seemed to promise a classless society of opportunity, the reality is now that the rich are getting richer on the backs of the rest, who are getting poorer.
That recognition is shared by constituents up and down the country. There is political damage for the Government in that widening gap between rich and poor.
However, there has been a far more damaging social and economic cost. The Government have failed to create the social partnership essential if everyone is to pull together for economic success and, indeed, share in its benefits. The Government could take a lead in ensuring that people become stake holders in their communities. They could take a lead in overcoming the divisions between rich and poor, between employers and employees. I take the view that Britain works best when it works together. But working together is inhibited by bumper pay and perks for the few and falling living standards for the many. The Government have done precisely nothing to tackle executive perks and pay.
The Finance Bill is a missed opportunity. I very much hope that, during our deliberations not only this evening but in Committee, we shall put the Finance Bill on the right track and accommodate the concerns of all our constituents.

Mr. Hartley Booth: Does the hon. Gentleman concede that—

Madam Deputy Speaker: Order. I understand that, in fact, the hon. Member has completed his speech.

Mr. Hartley Booth: If I cannot intervene, perhaps I can put my point in the following short speech. First, I apologise for not having been present for the entirety of the debate. That has not been possible, but I have been present for the past few speeches, and I have heard how Labour Members have berated our mismanagement of the economy and said that we have not addressed a fairness agenda when we could have done.
Of course, Labour Members have totally forgotten, in looking at this new, unified Budget and the economy overall, that Britain's economy at this time is more successful than it has been at any time during the past 30 years. Economists who lecture at university talk about two sorts of recovery. They talk about the recovery that we see on the high street, led by a boom, with endless spending and doubtless the spin-off of a feel-good factor, and they also speak about the holy grail. They talk about the export-led recovery. That commodity has very rarely been seen in the economic history of Britain over the past 50 years, but our current economic recovery is led by exports, and that is to be commended. The Government have achieved that through tough decisions, and the manufacturing and service sectors have combined to back the economy.
As my right hon. Friend the Chief Secretary to the Treasury said, backed by foreign investment, we have achieved what is, after the recession in recent years, a miraculous recovery. I commend the 348 pages of the Finance Bill, because it is built on the back of our current economic success, with its low inflation, low interest rates and falling unemployment.
The hon. Member for Darlington (Mr. Milburn) was derogatory about our unemployment figures. When Opposition Members talk about the unemployment statistics, they always forget that huge force of people—which it is difficult to describe—known as the black economy. Those people are employed. They may not be paying taxes, but they are employed.
If there is a fudge or a mistake in the official statistics, it goes the other way—in the direction that is inconvenient for the Opposition's arguments. There are probably far more people employed, as a result of the black economy, than people believe. The unemployment statistics have been miscalculated since 1945 and the Attlee Government. Until 1984–85, the unemployment statistics did not include the self-employed. Opposition Members who continue to berate us for fudging the unemployment statistics seem to be unaware that, for 30 or 40 years, those statistics were inaccurate, as they did not include reference to the black economy or the self-employed.
Reference has been made to the absence of a feel-good factor. The hon. Member for Darlington referred to the fact that my right hon. Friend the Financial Secretary to the Treasury indicated dissent earlier. However, in economic language, there is no feel-good factor at this stage. We hope that the feel-good factor will return to our constituents—certainly before the next election.
The hon. Member for Darlington referred to the gap between the rich and the poor. Opposition Members often raise that point. It appears from the statistics that the gap has been widening, but what kind of nation are we if our thoughts and debates are constantly driven by jealousy? That is the only reason for failing to deal with the appropriate factor—absolute poverty.
Conservatives are concerned about absolute poverty. Absolute poverty has not been increasing. Over the past few years, poverty has been eliminated in many parts of the country. That is the quotient we should consider. We came to this House to ensure that absolute poverty was eliminated from all our people.
We are concerned about poverty, but we are not concerned about mere gaps between one set of people who may have been fortunate and others who have not been fortunate. We want to ensure that the less fortunate are helped; that is why the Budget pinpoints the creation of jobs, particularly in relation to small businesses in respect of the work incentive initiatives.
As a result of the prudent management of the economy, and despite the undeniable difficulties that we are experiencing in many parts of Britain, we have been able to raise spending on targeted items in the Budget. We heard from the Dispatch Box today how £1.3 billion extra has been found for the national health service. More spending will be forthcoming for local authorities, the police and law and order. More resources have even been found for European spending, but perhaps I will refer to that in a moment.
There have been prudent cuts, for good reason, in parts of the expenditure—for example, on housing. Before Opposition Members intervene to claim that that is simply terrible—the Financial Secretary to the Treasury, a former Housing Minister, is to respond to this debate—I must point out that there are 750,000 empty properties in Britain. As a party and a Government, we are interested in using the national assets and resources of this country efficiently. We want to ensure that houses and other property are used for the benefit of all our people, and particularly the homeless.
I am happy that we have cut some aspects of housing expenditure, providing that, down in Marsham street in the Department responsible for housing, there are endless initiatives to harness the unused properties, particularly for our homeless people. I offer qualified support for that policy.
I referred to European spending in the debate on the Queen's Speech, and I do not apologise for raising it again. When my right hon. Friend the Financial Secretary replies to the debate, I hope that he will respond to an issue that is close to my heart. I am concerned about the fact that this country contributes £200 million to overall European spending of £1,000 million on black tobacco.
Black tobacco is part of the common agricultural policy, so it is perhaps not directly related to this debate. However, I would argue that it is legitimate for me to raise the point today. The black tobacco regime is a heinous waste of £200 million of our money, which could be spent on no fewer than three hospitals in this country. That money is also spent wastefully and cruelly, because only about 40 per cent. of it is smoked in Europe. The balance is smoked in the developing parts of the world, and it kills people there because there are no warnings against its use.
I hope for a specific response from the Treasury about my point. I understand that we are bound by European spending rules, but I hope that, the next time that Finance Ministers from this country go to the Council of Ministers on our behalf, they will raise that point about black tobacco. I hope that the table is punched, as we should not be wasting £200 million of British taxpayers' money in that appalling way.
The hon. Member for, Darlington said that this Budget was not a Budget for employment, but I believe that employment is at the heart of the Budget.
The Budget package helped by giving £680 million over the next year for work incentives. There were four measures to encourage employers to take on the unemployed. Employers' national insurance contributions will be cut by 0.6 per cent. for people earning less than £205 a week from April this year. Employers who hire someone who has been out of work for two years or more will be able to obtain a full NIC rebate for that person for up to one year, again starting in April. The work trial scheme is being expanded to 150,000 places. A further workstart pilot scheme will be developed, thereby helping 5,000 people.
Four measures are introduced to ease the transition from unemployment to work. In last week's debate, there was an analysis of and support for them. There are two measures for people who want to find full-time work, and three measures to keep unemployed people in touch with the labour market.
Last week, I visited the employment office in Finchley, and I was pleased to hear of local people's success in going back to work. I am pleased to know that, time and again, through the host of initiatives in the Budget, including other initiatives, people are helped to get back to work. The hon. Member for Darlington asserted that we are not concerned about employment. On the contrary, at the very heart of the Budget is concern about and spending on unemployment, in a host of imaginative new policies.
I also commend and support the widening of the 20 per cent. band. The second rise in VAT on fuel was not proceeded with. Opposition Members berated us for not conceding that point sooner, but that was yet another example of the democratic process working. Many Conservative Members loyally supported the Government's attempt to raise VAT on fuel. Indeed, the hypocrisy of Labour Members and of the Liberal Democrats was exposed because, for greenhouse, environmental or whatever reasons, they too would have taxed heating.
Finally, when, as a democratic voice for people, Conservative Members rejected the second round of that VAT rise, I for one supported that rejection, as did many of my constituents. Far from a concession, that was a victory for democracy.
The hon. Member for Darlington mentioned privatisation. Privatisation is not to be characterised just as a way in which the incomes of a few senior executives reach international standards. That is not the true test of privatisation in historical terms. We must look at how—I nearly said "curmudgeonly"—solid, old-fashioned national utilities are suddenly becoming sparkling young companies with a worldwide horizon.
British Gas, electricity companies and water companies are looking around the world for new markets. I have been heartened by the activities of British Gas in Kazakhstan, where I was last summer. Such companies are now doing things for all of us that they would never have dreamt of doing before. They have been freed, thanks to our privatisation policies. We will not have Opposition Members saying that it is yet another excuse for the few to gain too much income.
What is the Labour party's comment on the Bill? I was happy to go on television to make my modest contribution to supporting the Government's proposals in the autumn, and the Labour party spokesman, who was with me, could say nothing except that the Budget was against investment. Time and again, the Labour party spokesman said, "This Budget omits and ignores investment."
Labour Members were unable to count the fact that, through our sensible management of the economy, we have attracted, like a magnet, investment from around the world, and that 40 to 50 per cent. of Japanese and American investment has come to this country. I have heard of double counting, but I have never heard of subtraction counting, which is what the Labour party is into. Labour Members would subtract such investment from around the world from total investment in the United Kingdom. That is wrong, and it should be exposed. I hope that the message will go out from the House tonight.
What is the rest of the Labour party's opposition to our proposals and to the Bill? It is a Trojan horse. Labour Members wish to push their smart-looking wooden edifice into the heart of our citadel. At the heart of their horse

they have "spend, spend and spend again" shock troops, who will jump out of the horse at the appropriate time if the electorate ever give them the chance.
On Monday morning, I read an interesting article by the former editor of The Times, Lord Rees-Mogg, in which he explained the nature of the dilemma under which Opposition Members labour. Their dilemma is that they have a certain constituency—the welfare constituency—which would drive them onward because it needs public expenditure. Opposition Members may keep their shock troops hidden in their smart-looking horse, but pressure from their constituency is so great that there will be more spending.
That was exemplified in the recent curious happenings in the Labour party over education. While many hon. Members were enjoying their short Christmas break, it was suggested that the Labour party would abolish the VAT concession on education. That suggestion was withdrawn with alacrity, which raised several suspicions among Conservative Members, and not surprisingly.
If the VAT concession was removed, what would happen? If we do our sums, we know that there would be an extra burden of £120 million on the Exchequer, because some people would find it impossible to pay private, broader education bills on top of their taxes. Probably about 20 per cent. of private schools would close. It was not surprising that, just days after it was uttered by the education spokesman, the word was withdrawn, so sincere are Labour Members in wanting to maintain their stance as the Trojan horse for spending.
I know that a number of hon. Members wish to speak, so I shall conclude. The Government's handling of the economy is exemplified by the Bill, by falling unemployment and by export-led recovery. It is to be commended.

8 pm

Mr. Malcolm Chisholm: It is a curious and perhaps unique feature of the Bill that so many of the tax increases that will be introduced in the next financial year are not contained in it. It is bizarre that the tax increases announced in December are not yet included in the Bill.
Many of April's tax increases were legislated for in previous Finance Acts, which is unusual. They include the reduction in the married couple's allowance, which will mean that a couple paying tax at only 20 per cent. will be £86 a year worse off after April, and the reduction in mortgage interest tax relief, which will mean that a family with an average mortgage will be £10 a month worse off after April.
Other harsh Budget measures have not been included in the Bill, notably the stripping away of mortgage assistance for those on income support, which will mean that a family with an average mortgage will have to pay £20 a month more in insurance.
Throughout proceedings on the Bill we shall remind Conservative Members of the broader picture and of the many tax increases that those on middle and low incomes have already had to endure. In our campaigning as we approach the general election, we shall remind people—not that they need much reminding—that under Finance Acts since the last general election they have endured the equivalent of a 7p increase in income tax. It is no use the


Conservative party expecting people to be grateful when the Government give back a proportion of that 7p in tax bribes over the next two years.
Looking back, we shall remind the public that since the Tories took office almost 16 years ago the richest 1 per cent. of the population have cumulatively gained £75 billion in tax cuts, while the poorest fifth of the population have suffered a rise in their tax contributions from 31 per cent. of income in 1979 to 39 per cent. in 1992. That percentage has risen since, although we do not have a recent figure for it.
Looking ahead, we shall remind people that next year they will be worse off when housing costs are taken into account: they will not need much reminding of that. We shall also drive home the point that next year those on low and middle incomes will have to pay a higher percentage of their income in tax than those on the highest incomes. The Institute for Fiscal Studies has said that the middle deciles of the population will have to pay another 1.4 per cent. of their income, in tax increases while the top decile will have to pay only 0.7 per cent. Indeed, for some of the super-rich in that top decile, the figure will be even lower because of the tax loopholes in the Bill. Before Conservative Members become too excited about the term "tax loopholes", I should point out that I am drawing from an editorial in the Financial Times, which described venture capital trusts and the new arrangements for the enterprise investment scheme as tax loopholes.
A broadsheet published by BESt Investment called "Tax Shelter Service" is well worth reading. It was quoted by my hon. Friend the Member for Dunfermline, East (Mr. Brown) in an earlier debate, but it is worth repeating. That company gives advice on tax shelters and it cannot contain its joy about the measures in the Budget that will help those on high incomes.
I shall quote a couple of sentences from the broadsheet. It states:
The Budget may have been regarded as 'boring' by most commentators but for the Tax Shelter business it contained arguably the most exciting combination of measures ever seen … investors will have no less than four opportunities for sheltering tax: EIS, Enterprise Zone Property, Reinvestment Relief and Venture Capital Trusts. As a result we cannot see why anyone should choose to pay CGT in future.
Thereafter, it goes into the details. There is a liberal spraying of exclamation marks. I do not think that the company can believe its good fortune in having been given so many opportunities to shelter tax.
Apart from the surprises mentioned in the broadsheet, it does not mention measures that have surprised some of us, such as the abolition of the interest-in-land rule for enterprise investment and other schemes. People put money into property under the business expansion scheme and made a killing, but we thought that at least that had now gone for ever. It appears that it has come back through the abolition of the interest-in-land rule. I hope that the Minister will respond to that point when he replies.
Other measures in the Budget will help those at the very top end of the tax scale. For example, inheritance tax allowance has been fully uprated. The rate for those eligible to tax relief on private medical insurance will be maintained at 25 per cent., while the married couple's

allowance and mortgage tax relief have gone down to 20 and then to 15 per cent. There are new tax opportunities for those with PEPs and TESSAs.
As the vice-chairman of the Conservative party said—it has been quoted many times before and will be quoted many times again:
the reality is now that the rich are getting richer on the backs of the rest, who are getting poorer.
The same man invented the phrase "killer facts". I remind Conservative Members of a killer fact that, unfortunately, is quite literally true in some cases. It is that 14 million people in this country live on incomes of less than £115 a week. I am referring to one in four of the population, a rise from one in 10 in 1979.
The problems of that group are not addressed by the Bill or by the other Budget measures that are not included in it. Those people are crying out for employment measures to help them into work or tax measures if they work and pay tax. The Budget contained only marginal employment measures, which are more than outweighed by the Budget's negative features.
The Budget offers only crumbs in tax measures. The hon. Member for Finchley (Mr. Booth) spoke about the widening of the 20 per cent. band by £200; even in last year's vicious tax-increasing Budget it was widened by £500. Many people do not benefit from that anyway. Those earning £6,000, £5,000 or £4,000 a year do not gain any advantage from the extension of the 20 per cent. band.
What would have helped the poor people in society who pay tax would have been a very large increase in the personal allowance. The Government are proud of the fact that they have increased it by £80 this year. I suppose that that is an improvement on the last two years. The Government actually had to include clauses in previous Finance Bills to break the law of the land—the Rooker-Wise amendment—that laid down that personal allowances had to rise by the rate of inflation. Therefore, I suppose that this year we should be thankful for small mercies.
A person paying tax at the 20 per cent. level will be £20 a year better off following the uprating of the personal allowance, but that does not compensate for the fact that he or she will be £86 a year worse off by the change to the married couple's allowance.
The widow's allowance and the additional personal allowance will be cut, which will affect lone parents. The allowance for the blind has been frozen. The Budget contains no measures to help people on low or middle incomes. I was going to say that we were all grateful that the proposed increase in VAT to 17.5 per cent. was scrapped, but people's campaigning, led by the Labour party, achieved the change. We are pleased that that increase will not be enacted in April.
New measures were introduced to replace the VAT proposal in the mini-Budget. I presume that they will creep into the Finance Bill in Committee. They will lead to increases in indirect taxes, which, again, will have a disproportionate effect on people on low incomes.
I shall not go into details today but, as a Scottish Member, I am especially concerned about the extra tax on whisky. A nip of whisky contains the same amount of alcohol as a glass of wine, yet twice the amount of tax is charged on it. I hope to speak about that matter next week. It was scandalous that the price of beer and whisky went up but that the price of champagne went down. Those


matters must be dealt with in Committee, as must the increase in hydrocarbon oil tax, which many people have discussed in relation to making car ownership more expensive.
The Bill affects public transport and, therefore, members of society on low incomes. In last year's Budget, the fuel rebate for public transport was frozen. This year, the price of diesel has gone up by 5 per cent., to which will be added inflation, plus the extra penny imposed in the December Budget. That will mean more expensive public transport. That will have to be dealt with in Committee.
The Chancellor of the Exchequer said in his mini-Budget statement that there was no alternative, echoing one of his predecessors, but we know that many alternatives exist. A simple alternative for his extra £1 billion would have been a 45p tax rate for income of more than £50,000. Even that, however, would not have been necessary if he had gone much higher and taken money off the super-rich, which would easily have raised the necessary revenue.
Labour Members have raised the issue of a windfall tax on the utilities, which since the beginning of the recession have made profits of £45 billion. The Chancellor somehow thought that that suggestion was unheard of, yet one of his predecessors, Lord Howe, imposed such a tax on banks in 1981. The same argument applies to the utilities today as applied to the banks then.
The Chancellor said that a windfall tax could be only a one-off, so it would not do. We all know that the Conservatives' strategy is based on cutting taxes next year and the year after, so a windfall tax—a one-off for one year—would have adequately covered the shortfall in the Budget.
Labour Members raised the executive share options issue. Share options are not taxed as income. Mention has already been made of the way in which capital gains tax can be avoided—the experts are saying, "Who needs to pay it anyway?" It is even more important, therefore, that executive share options are taxed as income. When shares that have been acquired in that way are sold on, they are liable to capital gains tax. When options are exercised, they should be taxed as income. People sitting on those executive share options are like people who fill in their national lottery card with a special dispensation to score off every single number: they cannot lose.
Many examples have been given. For example, 63 electricity chairmen have £29 million worth of executive share options. The amount of money involved is massive. We know that it is a scandal and action should be taken.

Mr. Booth: Would the hon. Gentleman also condemn share options for workers?

Mr. Chisholm: I am against share options completely; the whole idea of share options is bad.

Mr. Booth: Will the hon. Gentleman explain why, time after time, when share options have been given to the work force, the performance of the company involved—National Freight comes immediately to mind—has improved dramatically and obviously?

Mr. Chisholm: That may be true in certain examples, but we know that, in the vast bulk of examples, no relationship exists between the performance of the company and the share option issue. It may be possible to

consider the matter and to make a connection between the two, but in general I am against the principle of share options.
There are other examples of how money could be raised. Last year, during discussions on the Finance Bill, Labour Members raised the issue of tax relief on private medical insurance. I am sure that we shall do so again: it is an easy way of raising £80 million or £90 million.
The Conservative party, however, always looks after a certain section of the population. Nowhere was that made more clear than in the investigation into corporate taxation and how industry was to be financed, which was started by the previous Financial Secretary. Everyone knows that he was acknowledging a problem that we all know exists—the massive increases in dividend payouts. In the mid 1980s, they amounted to only £11 billion but now they amount to more than twice as much. They kept on increasing, even throughout the recession.
Lord Hanson said that such an investigation was unacceptable and made the staggering accusation against the previous Financial Secretary that he was some sort of socialist, but the review of dividend taxation was dropped. There is nothing in the Bill about that crucial matter. As someone has said, it is the dog that did not bark. Something must be done about it and that is why the Labour party is urgently investigating the issue. It is connected with this country's poor investment record in the past year.
Conservative Members have made glowing references to figures that suggest that the economy is doing well. It is certainly doing better than it was, which is not difficult. Last year, however, business investment was only 2 per cent. and, even this week, the Select Committee on the Treasury and Civil Service, which has a Conservative majority, told Labour's Treasury spokesmen that it cannot accept the investment predictions for next year.
It is being suggested that I finish my speech, so I shall omit certain things that I wanted to say and raise them in Committee. I want briefly, however, to mention one other disappointing omission. Once again, the Bill says nothing about child care. We introduced a new clause on that matter last year. I notice that the industrial building allowance has been extended to new road building, which I am not happy about. We introduced a new clause last year to extend the industrial building allowance in relation to the provision of child care facilities in workplaces. The Government must certainly deal with the issue of the supply of child care. We shall return to it in Committee.
I shall not go into details on the general economic situation because time is running out. The country's economic position has improved but there are still serious problems. Further problems for the economy are on the horizon because of rising interest rates, increased taxation and reductions in capital expenditure. Many problems exist that should have been dealt with, but unfortunately the Government do not have an economic strategy; they have only an election strategy. The Financial Times stated that
preparation for the mother of all bribes is well in hand.
Everyone can see it but the British people will see through it and the Government will not be the Government much longer.

Mr. Peter Luff: Mr. Deputy Speaker, I hope that, in the context of a quotation, even a quotation that I cannot attribute accurately, I may be excused for some unparliamentary language. I think that it was an American President who once observed that a lie is around the world while the truth is getting its boots on. Because of that, it is important that, once again, we reassert the context in which the Finance Bill is set.
The Labour party constantly seeks to denigrate the extent of the country's economic success. We have had economic growth for two and a half successive years. Unemployment has fallen for two years and it is at the lowest rate of any major country in the European Union. We have low inflation—the lowest inflation that I can remember in my lifetime. We have low interest rates and strong exports. Productivity is growing sharply. That is a picture of an economy of which we should be profoundly proud. I certainly have deep pride in it.
My local manufacturers are benefiting exceptionally well from the excellent macro-economic climate. Exporters are doing particularly well. I am glad to say that even my retailers are looking more cheerful than they did a year or two ago. The retail sector is not booming, but it is much stronger. We do not want a boom. We want steady, sustained growth. We do not want the boom-bust cycle from the past. How often we are told that by the Labour party. How good it is to see it being achieved in the British economy. It is fair to say that my construction sector is still a little depressed. However, I believe that the stable conditions that we are creating and the steady improvements that we are bringing about will lead to a steady revival in that sector, too.
What my constituents are looking for from this Finance Bill is simple. They want it to maintain the favourable economic conditions that the Government have created, keep interest rates steady and keep the level of sterling steady so that our exporters can continue to succeed. They also want the Government—I make no apology for this—to reduce levels of taxation in the future. The Bill creates the conditions for precisely that.
I do not say for a minute that I welcome the increases in taxation that are implied in the Bill. I accept them as necessary. In the almost three years that I have been a Member of Parliament, I can remember only one occasion on which I have been lobbied for a reduction in public expenditure. This week and last week I have been lobbied for more public expenditure for transport—for railway services—for the health service, for my education services, for my social services, for my fire service, for my police authority and for my local authority housing department. That is a staggering wish list, which I understand, but which has to be funded. It can be paid for only out of taxation.
It is strange that the only representation on taxation that I have received from my county council, which is responsible for many of the areas of expenditure that I have identified and is run by a Liberal-Labour pact, was for a reduction in taxation. Time and again we hear from our political opponents the list of things on which they wish us to spend more money. Time and again they refuse to see that that money has to be found from the taxpayer. There is one political argument that the Conservative party has not yet quite won. It is the argument that there

is no such thing as Government money. There is only taxpayers' money. That simple lesson still has not been learnt, certainly by my county council.
I sincerely hope that the Finance Bill will set the framework for further economic growth and so enable us to reduce public expenditure as a percentage of the gross national product. In that context, I feel that I must accept in the interim the provisions in the Finance Bill to increase taxation. I am tempted to suggest to my right hon. Friend the Financial Secretary to the Treasury, who was recently a Minister in the Department of the Environment, that one way of getting round the pressure for public expenditure from our local authorities is to remove the capping limits on local authorities. That would enable them to raise taxes locally and discover how unpopular the business of raising taxes is. It might also enable us to differentiate between well-run Conservative authorities and profligate Labour authorities, but that is a debate for another day.
What increases in taxation does the Finance Bill contain? It contains an increase in beer duty. As a member of the parliamentary beer club, I can only be well aware of the significant increase in cross-border shopping. I am grateful for the assurances that I have received from my right hon. and hon. Friends in the Treasury about the steps being taken to counter that trend through increased surveillance by Customs and Excise. I hope that in future Budgets, reductions or stability in beer duty will be a major priority.
We have seen an increase in the hydrocarbon oil duties. I accept that as part of the price that we must pay to meet our international obligations to reduce carbon dioxide emissions. I urge my right hon. and hon. Friends to remember the effect that steadily increasing hydrocarbon oil duties can have on rural areas. I wonder whether in future Budgets we might consider the possibility of introducing a variable vehicle excise duty instead of simply loading duty on to petrol and diesel prices. We could penalise the larger, more expensive, gas-guzzling cars and give those who own the smaller, more economical and environmentally friendly cars an easier ride when it comes to paying vehicle excise duty. That may be an alternative mechanism to increasing hydrocarbon oil duties.
Tobacco duty has been increased. I accept fully that we must cut consumption. I am not one of those who believe that advertising bans have any part to play in cutting consumption. The evidence is that they do not do that. I accept that the price mechanism is one of the best ways of cutting consumption, but we must keep the level of taxation under careful review. Concern has been expressed that the elasticity of demand among the poorer sections of our community may mean that the signals are less effective and the reductions in consumption are proportionally smaller for every increase in price. I have received a large number of representations from local confectioners, tobacconists and newsagents who are worried about the effect on their trade. We need to consider that carefully in future Budgets.
The principle of broadening the tax base should be supported by hon. Members on both sides of the House. I had my own difficulties with the order that we discussed last week to impose VAT on transport, particularly as it might have affected steam railways. I was grateful to receive a parliamentary answer, which specified in pretty


clear terms that the Severn Valley railway would be exempt from the provisions. I am glad that the matter was largely resolved.
My insurance broker is not terribly thrilled about the insurance premium tax, but I support the principle of broadening the tax base. I hope that it will lead to an overall reduction in the general level of taxes in due course.
When the Government explained their proposal to impose VAT on certain new transport facilities within amusement parks and museums, they justified it as closing a loophole. The Finance Bill does precisely that. I am told that it closes some £1.5 billion worth of loopholes over three years. I am pleased that the Government have declined to close one loophole referred to by the shadow Chancellor. He suggested that vast amounts of money could be raised by closing the alleged loophole in executive share options.
I was in the private sector before I came to the House. I twice benefited from modest executive share option schemes. On both occasions I paid income tax on the exercise of those options. I find it difficult to accept that executive share options are anything other than carefully defined by the Inland Revenue and effectively taxed, as I know to my personal cost. Some loophole.
It is a good thing that the Finance Bill does not seek to deal with executive share options because I believe in the principle of broadening share ownership. I was fascinated to hear the hon. Member for Edinburgh, Leith (Mr. Chisholm), who is just leaving the Chamber to hand his notes to Hansard, admit that he was opposed to the principle of share options. There, we may be getting nearer the truth about the Labour party's position on the issue. It opposes the principle. I believe that share options are a vital part of a vibrant capitalist economy. They should be extended to more and more of the work force. Not only the so-called fat cats in the boardrooms, but a large number of the work force in many British businesses benefit from share options.
I would be pleased if the Labour party moved amendments in Committee on executive share options. It would enable Conservative Members to expose the shabby politics of envy which still dominate so much of the Labour party's thinking and which would be so destructive of incentives in our society and economy.
I welcome clauses 82 to 86, which deal with capital allowances or roll-over relief for shipping. The House will be aware of my interest in shipping. I have been involved in the Chamber of Shipping for many years, both before I came to the House and since I joined it. I am regularly lobbied in my constituency by ratings and officers in the Merchant Navy about the importance of assisting that industry to reinvest and employ British seamen. It is a tribute to the Government and my right hon. and learned Friend the Chancellor that the provision for roll-over relief for shipping is in the Finance Bill. It would be a shame if the Government spoilt the shipping provision for a hap'orth of tar.
I hope that the Government will consider the possibility of extending the shipping provision from three to five years. There would be no cost to the Exchequer in doing so, but it would bring the cycle of the shipping industry more into line with the taxation treatment of the industry and enable more effective investment in shipping to take place than the three-year provision would allow.
There are two central tests for this Finance Bill. Does it help business and does it boost employment? The answer to both questions is: yes it does. It will certainly maintain the growing confidence of the business community because of the economic conditions that it will support.
I especially welcome the £600 million worth of transitional relief from business rates. I cannot say that I have received many letters of thanks from my business community for that aspect of the Bill, but I can imagine the letters that I would have received had it not been included. The Government are to be congratulated on that.
I also welcome the variety of schemes to help small businesses. The hon. Member for Leith described the venture capital trust scheme as "a loophole". I see it as one of those vehicles to encourage investment that he called for and I welcome it. I know that the small business community also welcomes the creation of the scheme as well as other aspects of the Bill—especially the fact that more businesses can move to quarterly payments of their PAYE and national insurance contributions, which will make an enormous difference to their cash flow.
It is no wonder that business welcomed the Budget. The president of the Association of British Chambers of Commerce said:
Measures to stimulate investment in growing companies are constructive and timely, and broadly in line with what the business community had been seeking. We believe this will lead to growth in the small firms sector. Coupled with the reduction in employers' NICs, we can look forward to continued job creation by small firms".
That is a pretty effective vote of confidence for the Budget and its effects on business.
The Finance Bill will also do much for the unemployed. I welcome some of the provisions, including the fact that employers who take on someone who has been unemployed for more than two years will no longer have to pay national insurance contributions for the first year, which will save about £300 per employee and will be a real incentive to employers to take on the long-term unemployed.
I welcome the fact that employers' national insurance contributions will be cut by 0.6 per cent. for employees earning less than £205 a week. I also welcome the work trial and workstart schemes, which are both part of the package that my right hon. and learned Friend the Chancellor presented in his Budget and will do much to assist the unemployed.
What is the alternative to this Finance Bill? It is clear that Labour has no coherent alternative proposals for the House, apart from its tried and trusted formula of envy and taxation. We have heard time and again from Labour Members about windfall taxes and excess profit taxes. I robustly dispute the fact that those so-called excess and windfall profits exist to be taxed and it is not good enough merely to dismiss the subject, as the hon. Member for Leith just did. If the Opposition are right, such windfall taxes are by their very nature temporary, one-off gains to the Treasury. They could not be regular or part of a coherent strategy for the effective management of the British economy.
I have already discussed executive share options. The shadow Chancellor tries to convey the impression that there is a pot of gold waiting there. Leaving aside the incentive for the work force and the inherent merit of such


share option schemes, which his proposals would undermine, the money that he thinks is there would not exist if his proposals were implemented.
Higher personal taxation and income tax are the constant cry from the Labour party. We know from experience that cutting the higher rates of personal taxation does not lead to a net loss in revenue to the Treasury. By encouraging people, providing incentives and enabling some people to return to this country who had left for more favourable taxation climates, cutting the higher rate would not decrease total revenue to the Treasury. In one year, higher personal taxation might produce some extra gain, but in the long term it would be a disaster for the country and for the Exchequer.
The Opposition's alternative to the Finance Bill is not a strategy, but a series of cheap debating points and sound bites. What does the Labour party do when it comes to taking decisions on measures such as the Finance Bill? It opposed all our major revenue-raising proposals and public expenditure savings yet, despite its best endeavours, it has made more and more spending commitments. That is a profoundly dishonest approach to politics. It is dishonest to oppose tax increases and public expenditure cuts, while proposing more commitments, without having a strategy to pay for them, and I worry about it.
Labour Members say that they want to tax the undeserving rich. Who are they and how much money would such a tax raise, even if they existed? It is shades of Lord Healey's famous phrase, "making the pips squeak".
I share concerns about increasing differentials in our society. There is a case for saying that some of the differentials are becoming too wide. One can learn that from events in other countries. There is a strong case for saying that the Iranian revolution had as much to do with concern about differentials as with Islamic fundamentalism. That is why some of the other emerging Islamic democracies, such as Tunisia, are taking robust steps to control excessive differentials.
How does one cope with such differentials, which breed jealousy and can undermine the strength and fabric of our society? One does so not by taxing the rich harder and harder, but by encouraging enterprise and job creation. Unemployment makes people poor and the Conservative strategy for coping with it is robust and intellectually coherent, unlike that of the Labour party. Quick-fix solutions, such as the minimum wage, sound good and ease the conscience. I wish that they would work, but they would not. They would destroy jobs, increase poverty and increase the very differentials that the Opposition claim to be attacking. Job creation is the route to ending differentials and this Bill takes a number of very important steps to help build on the Government's fine record—one of the best records in Europe.
On a local note, I am glad that one other measure that the Labour party wants is not in the Bill—some punitive measure for independent schools. Labour Members do not mind terribly what it is. It could be the abolition of charitable status, the imposition of value added tax on fees, or the abolition of the assisted places scheme—anything to try to get at the independent sector. I welcomed Labour's plans to tax independent education at Christmas. I welcomed the plans to abolish the assisted

places scheme. They are excellent news and will make my task in my constituency much easier, and I am grateful to Labour for that.
A Front-Bench Opposition spokesman highlighted the fact only today that one school in my constituency derives more benefit from the assisted places scheme than any other independent school in the west midlands. The Opposition thought that that was terrible news, but I welcomed it. It is marvellous news and it means that that fine school can continue to offer a valuable and different—it is not necessarily better—education to many people in my constituency who would not otherwise be able to use it.
I welcome it every time the Opposition talk about taxing independent schools. The more they trumpet their hostility to the independent sector, the more I like it. I hope that they will do so in Committee. I hope that they will table amendments to the Bill along those lines, as that would be good news for me and for my party.
I cannot pretend that I like every aspect of the Bill. Unlike Labour Members, no Conservative likes to increase taxes, but the Finance Bill lies at the heart of a strategy for Britain's continuing economic revival. The measures in it will enable the Government to continue to deliver economic success and export-led growth—that miracle or chimera for which we were looking throughout my childhood and my days as an economics student at university. We have actually achieved the chimera of export-led growth at last. The Bill will underpin the achievement of that miracle. The country has chased it for decades and we must not throw it away now. The Bill will not do so and I commend it to the House.

Mr. Thomas McAvoy: First, I must associate myself with the remarks that my hon. Friend the Member for Durham, North (Mr. Radice) made about my hon. Friend the Member for Dudley, West (Mr. Pearson). I also congratulate the hon. Member for Bridlington (Mr. Townend) on his tribute to our new hon. Friend. The warmth and sincerity of the hon. Gentleman's tribute were much appreciated by Labour Members. His tribute was generous, sincere and good to hear and I certainly associate myself with the thanks for those remarks.
It would have been much better if some of the Conservative Members who spoke after the hon. Member for Bridlington had been here to hear the candour and honesty with which he accepted the fact that the Budget increased the overall tax burden. It would have done Conservative Members good to hear that, because some of their speeches have not recognised the fact that the Government are increasing the overall tax burden. If there is any doubt about that, let me say that the Chief Secretary honestly admitted it at the Dispatch Box.
Governments should do their best to take the people with them. In so doing, they must exhibit a sense of fairness and try to accommodate people as much as possible. People must not feel that they have been unfairly treated and that the Government are selfish, encourage greediness and do not care about people who are less well off. This Government's actions do not inculcate a sense of fairness and society does not regard them as fair.
I am pleased that the Labour party has said that it will table new clauses to the Bill to give privatised industry regulators new powers to cut prices for millions, where a


regulator thinks that boardroom perks to the fat cats are excessive. I also support the action in subjecting executive share options to income tax. I agree fully with the full disclosure of top salaries, perks and payments in company boardrooms, including encouraging pension funds to vote at company meetings on those issues.
I also support the demand that private companies declare donations to the Conservative party. Everyone knows that donations can be made to various organisations, which then donate them to the Conservative party. No one would deny that.
I was interested in the comments of the hon. Member for Worcester (Mr. Luff). When I study Conservative Members and the political spectrum within their party—the so-called drys and wets—I sometimes think that the wets are not too bad, until I listen to one of them. They are every bit as vindictive, hard line and intolerant towards people who they think do not meet their standards as the others. There are no such thing as drys and wets in the Tory party. They are all the same—hard-line right wingers.
The hon. Member for Worcester mentioned costing, and Conservative Members often cry, "Labour should cost its policies." I remind Conservative Members of Lord Howe's comments when he was Chancellor of the Exchequer in a Conservative Government. He is always praised as having been a successful Chancellor. He said that only a fool in opposition would cost a programme, because only Governments see the books. I am amazed that Conservative Members ask us to cost what we would do when we are not in full possession of the facts in the books.
One item in the Budget demonstrates the vindictiveness to which I referred: the freezing of the blind person's allowance was a petty action. I know a number of blind people. The Government's reputation for helping the handicapped is bad enough. What a petty, vindictive move it was to freeze the blind person's allowance.
Conservative Members claim that theirs is a tax-cutting party. The so-called "tax bombshell" of which the Tories accused the Labour party at the 1992 election was effective, as many of my constituents have told me that they were afraid of that. I do not know how the Government can look us in the face and say that they did not deceive the public at that election, because the Budget increased the overall tax burden. As my hon. Friend the Member for Edinburgh, Leith (Mr. Chisholm) said, that does not include the mini-Budget, which raised the price of beer by 1p, wine by 5p a bottle, and spirits by 26p a bottle, as well as the price of cigarettes and petrol.
Although that is a more balanced approach to a Budget, it increases the ordinary family's tax burden. I shall not forget the sight of the Chief Secretary at the Dispatch Box defending the Government to the hilt and saying that the Budget would increase the household tax burden by only £2.30. Baroness Thatcher would be shocked to hear a Conservative Minister plead at the Dispatch Box that the Government were raising taxes by only £2.30. What a comedown for the Conservative party.

Mr. Aitken: It is true that, in 1995, taxation for the average family will rise by £2.30 a week. Even after taking that increase into account, 1995 is also the year in which households' real disposable incomes will rise by £5 a week, so the hon. Gentleman should present both sides of the picture fairly. His constituents in Glasgow,

Rutherglen will have more real disposable income even after the tax increases introduced in the Budget before last.

Mr. McAvoy: Although the Government claim that they have reduced direct taxes—we can all trot out the figures on that—since 1979 the overall tax take from all sources has increased under the Conservative Government. There can be no dispute about that if all indirect taxes are taken into account.
I am aware of the constraints of time and, despite the fact that I have been sitting in the Chamber for five and a half hours, I shall be considerate towards other colleagues.
I often hear Ministers mention the word "prudent". Since 1979, the proceeds of privatisation have amounted to £77 billion, which has been completely wasted on dole money and all sorts of other giveaways to chief executives of privatised industries. The wasted revenue from oil and the money spent on dole payments are an absolute disgrace.
When I hear the word "probity", I think of a subject which I mentioned earlier—Health Care International, which is the private hospital on Clydebank. The figures vary, but between £15 million and £30 million of public money—or, as the hon. Member for Worcester would say, taxpayers' money—was completely wasted in that private hospital project. To compound the matter, we have now heard that the Secretary of State for Scotland is considering giving another £4 million to whichever company takes over that hospital, which has already cost taxpayers billions of pounds. The Chief Secretary was incautious enough to say that that was a misjudgment by the Secretary of State for Scotland. I doubt whether the Secretary of State for Scotland accepts that, and it will be interesting to see his reaction.
If money were freely available and the Government were a success, there would be no problem. I speak only for my constituency, where I am currently fighting the proposed closure of a maternity hospital that is only 15 years old. It is a brand new hospital with top technology, fantastic staff and a great record, but the Greater Glasgow health board proposes to close it. The driving reason behind its proposal is cost.
Like other hon. Members, I do not recognise the rosy picture that Conservative Members paint, nor do I see a recovery coming.. Roll on the next general election, when the Conservatives will pay the price.

Mr. Stephen Timms: I am grateful for the opportunity to contribute to this debate. I add my congratulations to those that have already been expressed on both sides of the House to my hon. Friend the Member for Dudley, West (Mr. Pearson) on his thoughtful maiden speech. I must express some surprise at the considerable influence that is apparently wielded among Conservative Back Benchers by the British Amusement Catering Trades Association. I shall be interested to see how that influence is reflected in what happens in Committee.
I should like to consider the fairness of the Government's tax policies—not just those proposed in the Bill but those pursued throughout the past 15 years. It is time for a radical change of direction. My greatest anxiety is shared by the hon. Member for Worcester (Mr. Luff), who drew attention to the widening chasm between the


best-off in our society and everyone else. That chasm is due largely to the taxation policies that have been applied in the past 15 years. We cannot allow it to continue to get wider.
In 1979, the percentage of income paid in tax by the best-off 20 per cent. was 38 per cent. whereas the worst-off 20 per cent. paid 31 per cent. of their income in tax. Those proportions have now been more or less reversed, because by 1992—things have gone somewhat further since then—the top 20 per cent. were paying just 34 per cent. of their income in tax whereas the worst-off 20 per cent. were paying 39 per cent. of their income in tax. The worst-off were paying a significantly higher share of their total income in tax. I do not see how that can be defended. The gap is getting wider, because the income of the poorest 10 per cent. is less in real terms than it was in 1979.
According to the Department of Social Security's study of households on below average income, the real income of the bottom tenth in Britain dropped by 17 per cent. between 1979 and 1991–92. The explanation for that and the other changes that have occurred rests with the tax cuts in the 1980s, which benefited the highest earners, while the tax increases of the past few years have hit those on low and middle incomes. The two sets of tax changes have, affected different groups—tax cuts affected the best-off whereas tax increases affected the worst-off. That has caused the difficulties.
A survey of the tax winners and losers under the Government was published by the Institute for Fiscal Studies in February 1994—perhaps it is the most authoritative source on the subject. It concluded:
The tax rises which will come into effect in the next two years will reverse many of the tax reductions of the late 1980s. But those who gained from the cuts of the 1990s are not the same people as those who will lose from the increases of the early 1990s.
The total impact … will be to make the tax system less progressive. The rich will tend to have gained, the poor to have lost.
The impact on an average family with one average income and two children and a mortgage is such that, in 1979, that family was paying 32.2 per cent. of its earnings in taxes, but following the Budget it will pay 35.6 per cent. That is what is so dreadful, because the tax burden has gone up and the money has overwhelmingly been taken from the least-well-off.
People living in constituencies such as mine have been doubly hit in the past couple of years, because they have paid over the odds in tax increases and have been at the sharp end of the spending cuts. The cut in housing association investment programmes will be a particularly heavy blow to my constituents.
Fifteen years ago, the Conservative party took the view that it could afford to ignore the interests of people living in constituencies like mine and shift more and more of the tax burden on to them. What is now becoming clear, not just to me and my hon. Friends but more widely, is the scale of the damage that has been inflicted on the community in which we live—the one nation of which we are all part, willingly or not.
Much of the problem is due to the shift from direct to indirect taxation. There is a growing school of economic criticism of indirect taxation and few economists now accept that indirect taxation increases have less of a disincentive effect than direct taxation increases. Increases

in indirect taxation hammer families and the Government must recognise that their effect is deeply damaging. According to the economic trends survey of last year, Britain is unique among the G7 countries because it is the most heavily dependent on indirect taxation as a share of the total tax take.
The effects of such tax changes are particularly grim when set alongside the well-publicised excesses enjoyed by the people at the top of the privatised utilities in particular. It is hard for people to understand how those who were attracted to senior positions in the gas or water industries at salaries of between £60,000 and £80,000 a year now have to be paid three to five times more because that is what they need in order to be kept by those industries. Why were they not paid those sums prior to privatisation? Why did they not move then to jobs that paid those salaries? The reality is that once people have the power to award themselves enormous sums of money, that is exactly what they will do. The market does not enter into it. Those salaries are the result of the straightforward operation of unfettered greed and are not mitigated by the somewhat unctuous justifications that are made by the beneficiaries.
I am glad that the Confederation of British Industry is considering such high salaries, but I must express an element of scepticism when, as we have been told today, an investigation into that subject is to be carried out by someone who is paid more than £750,000 a year. My constituents and I are concerned that the rules are being made either by those who already receive high salaries or for their benefit. That is wrong.
The taxation policies of the past 15 years have been in hock to wealthy people. They have been able to demand tax cuts for themselves at the expense of everyone else. The damage to our communities, the effect in terms of social alienation, division, crime, economic inefficiency and waste, and the growth of dependence on benefits have been immense. We desperately need a new approach that places justice and fairness at the heart of the system in place of avarice; only then will we start to see a healing of the obvious damage all around us today.

Mr. Barry Field: I apologise to you, Mr. Deputy Speaker, and to colleagues on both sides of the House for not being present throughout the debate. I am unfortunately suffering from a nasty bout of' flu which seems to doing the rounds on the Isle of Wight. I should also declare that in the Register of Members' Interests I state that I advise the National Association of Holiday Centres.
The Finance Bills of the past couple of years have followed an amalgamated Budget and have been coupled with the announcement of a control total for public expenditure. I commend my right hon. Friend the Chief Secretary on the way in which he has ensured that public expenditure has fitted in with that control total. Long before I came to the House it always puzzled me how it was possible for every other organisation in Britain to fix its expenditure and its revenue raising, except Her Majesty's Government. If one revolution has befallen the Treasury in recent years that will be to the benefit of all the citizens of our nation and lead to sounder finance in future, it is the amalgamation of expenditure and taxation Budgets and the new control total arrangements.
I was pleased to note that at long last we are to try to tackle benefit fraud by electronic means. That is long overdue; all of us who represent seaside constituencies know about the "green giro culture". The number of times that girocheques go missing in the lodging house system is a serious problem. There must be a better way of ensuring that public expenditure, where it is necessary, gets through to the individual claimants and is not misused, as has been the case with the existing system.
I am also especially pleased to note that £600 million more is to be spent on the national health service, having been released through efficiency savings in the health service, and that the Government have honoured the election pledge to ensure that there is real growth in health expenditure.
I wish to make specific mention of the first year's full national insurance rebate to employers for taking on anyone who has been unemployed for more than two years, which will be introduced in April 1996. I and Mr. David Guy, then acting chairman of the Isle of Wight training and enterprise council, visited my right hon. Friend the Member for Wirral, West (Mr. Hunt) shortly after he had become Secretary of State for Employment and made that very proposal to him. Although we did not frame the proposal in precisely the details in which it is now set out, we suggested to my right hon. Friend that an opportunity existed to give a financial incentive to employers to take long-term unemployed people off the unemployment register. We presented him with a well worked out scheme. I am sure that the measure was not solely the initiative of the hon. Member for Isle of Wight or David Guy, although he is a respected and knowledgeable local business man, but I am pleased that we played a small part in suggesting it at an early stage. I am also pleased that there will be a back to work bonus, which will be tax free, and I am sure that it will be very worth while in trying to tackle the significant problem that we have as a nation—the core of long-term unemployment.
With regard to vehicle excise duty, and the consultation paper to be issued in relation to its extension to the possession of vehicles rather than only those that are on the highway, it has long been a practice in this country that people sometimes license their vehicles for the summer only, for their runs to the seaside and days out, and lay them up in winter. It has always been the law that, provided that they are not on the Queen's highway, people do not have to purchase a vehicle excise duty licence for their vehicles. I am also amazed to find how many people in this country own a second vehicle, which is not regularly taxed and used on the highway. I have had considerable correspondence from my constituents about that, and I warn my right hon. Friend the Chief Secretary to the Treasury that we are playing with fire on that issue.
It might be much more sensible if we went down the Swiss route and each had our own personal licence plates, which we carried with us from vehicle to vehicle, rather than persisting in the present rather outmoded form of taxation, if I may so describe it, which is incredibly costly to administer and falls into the category of unenforceable legislation along with dog licences and television licences. We have done away with the first of those, and the time is long overdue to reform the remaining two, which are also more honoured in the breach than in the observance. Anyone who doubts that has only to consider the amount of money that the Treasury took in during one of our

famous petrol energy crises and one had to produce a vehicle logbook with a current licence to obtain one's petrol rationing cards. The Treasury immediately took in a staggering amount of money—I believe that it was nearly £0.5 billion. I stand to be corrected on the ex act figure, but it was certainly an extraordinary amount of money. 
As we speak, our constituents throughout the United Kingdom are receiving the new rating valuations from the rating officer. I was pleased to note that transitional relief is continuing. I referred to that in correspondence with my right hon. Friend the Chief Secretary to the Treasury long before the revaluation. However, I must tell him that, remarkably, after one of the most bruising recessions that British industry and business have ever experienced, some of the valuations are substantially greater than the previous figures. I hope to meet the Minister's colleague to discuss that matter as I wonder what is going on.
Having had the honour, albeit briefly, to be Chairman of the Select Committee on the Environment, I can say that we look forward to the landfill levy. The Treasury cannot bring itself to call it a levy—it is a landfill tax. As always, the new tax brings with it a danger, and we shall have to keep a wary eye out for fly tipping in the countryside.
I am pleased, both personally and for the venture capital industry, that we have extended reinvestment relief and taken away the nonsense about the percentage of property ownership within the qualifying companies. That is welcome, but the scheme has not had nearly enough publicity. I do not think that people, particularly small business men, understand that they can sell their businesses and not pay one ha'penny of capital gains tax. The message has not got through. Even some accountants do not seem fully to understand the mechanism, which will be extended by the Finance Bill. I hope that my right hon. Friend the Chief Secretary will address that point in due course. We shall also shortly see self-assessment—itself a revolution in taxation in this country.
My final subject, which falls within schedule 3, has already been mentioned—that of amusement machines. That provision fulfils Field's first and second laws of legislation. Field's first law of legislation is that all legislation comes long after the event and long after the concern has passed into the mists of time. The fact that video games have only just penetrated the consciousness of the Treasury exactly fulfils my first law of legislation.
Field's second law of legislation is that all legislation has absolutely the opposite effect of that intended. The taxation of video game machines will ensure that they are driven out of the amusement arcades along our seafronts. They will be replaced by more gaming machines—exactly the concern that people have about amusement arcades and their influence on young people. The effect will thus be the reverse of that intended. I have to declare an interest in that I have a space invader machine in my living room as I was a bit of an addict in my day.

Mr. Roy Thomason: Does my hon. Friend agree that the introduction of the proposed taxation system on video machines may not yield the revenue that the Treasury has predicted? Video machines are reputed not to produce sufficient funds to justify their continued existence, which may lead to their removal by many operators and therefore to the yield being substantially less than that anticipated by my right hon. Friend the


Chief Secretary. Does my hon. Friend think, therefore, that there is a case for reinvestigating that subject to see whether it would be appropriate to ease the taxation to ensure that it is set at a level which is justifiable and yields the expected sums?

Mr. Field: Not only was that intervention timely, but it comes from a former chairman of the Association of District Councils and distinguished leader of Bournemouth council, which was one of the first seaside authorities in the United Kingdom to put specialist meters on the machines in its amusement arcades so that the authority could prove to the Customs and Excise precisely how much money the machines were generating. That was a revolution in the arcade industry at the time and one or two people who were taking a couple of shillings out of the back of the machines thought that it would be their undoing. It illustrates the point that a local authority in the United Kingdom has the information to prove to the Customs and Excise, and therefore the Treasury, just how little some of the machines yield. My hon. Friend makes a pertinent point when he says that the provision may have the opposite effect to that intended.
I conclude by quoting the National Association of Holiday Centres Ltd, which includes Butlin's and similar organisations. It said:
The new tax will have a devastating effect on the industry reducing significantly the number of amusement machines sited in such places as amusement arcades, holiday and caravan parks, indeed putting some out of business. Far from generating the revenue for the Exchequer we believe the overall effect will be to reduce revenues taking into account loss of expected duty and existing VAT from machines sited, loss of corporation tax, PAYE and NI contributions from those companies making redundancies or going out of business and loss of duty on machines imported into this country".
I point out that most of our resorts do not open all year round—they are fairly short-term operations. As knowledgeable as he is, I cannot believe that my right hon. Friend believes that United Kingdom resorts have done so well that they need a tax of this sort in the current economic climate and as they come out of recession.

Mr. Bill Etherington: Like the hon. Member for Isle of Wight (Mr. Field), I apologise for my absence during most of the debate today. Unlike him, my absence was due to attending to other parliamentary duties. I thank the hon. Gentleman for keeping his speech to a reasonable length. I also thank my two hon. Friends the Members for Glasgow, Rutherglen (Mr. McAvoy) and for Newham, North-East (Mr. Timms), who spoke before him, and I thank you, Mr. Deputy Speaker, and the Whips for enabling me to make a short contribution to the debate.
When I spoke in the Budget debate, the Chief Secretary, who is in the Chamber, was kind enough to say that he thought that I had made a good speech, but that it was a little too long. I cannot guarantee the quality of my speech tonight, but I can assure the Minister that he will be well satisfied with the quantity.
I wish to speak, more in sadness than in anger on this occasion, about only one subject: something is missing from the Budget, as it has been missing from the previous

three. The Government have not addressed the anomaly of charities being unable to redeem value added tax payments. That is a quite serious problem.
Like many other people, I would like to live in a world where charities were not necessary. That would be wonderful, but it is never likely to happen. Indeed, the Government's policies have increased the pressure on charities that are subsidising services which should be provided by the state. Under those circumstances, I expected the Government to show a little more sympathy when considering the needs of charities.
More than £300 million in VAT payments is collected—wrongly, in my view—from charities each year. Charities do not make profits; they provide services. They exist only because people are prepared to give either of their money or of their time. It is wrong that people who take a Christian attitude towards life should find themselves unwitting tax collectors for the Government. That is morally wrong, and I hope that the Government will address that issue in Committee.
The services provided by charities are either exempt according to European Union legislation, or they fall outside the scope of VAT; yet we have a ridiculous situation whereby VAT is still being collected. At best, that could be described as a form of robbery.
What is worse is that local authorities, health authorities, boards and trusts that provide contracted-out services can receive full recovery of VAT upon their services. Obviously, that is wrong. What applies for local authorities and health authorities should apply for charities, because there are many parallels.
I accept that not all charities are what they seem. I believe that some charities are little more than extensions of certain vested interests. But that is a discussion for another time and place. The vast majority of charities—those which provide services for the disabled, the poor, the old and the disadvantaged—are admirable. As long as they are needed, they should receive preferential treatment, not inferior treatment from the Government. Up to 10 per cent. of what is collected by charities to carry out good works is being lost in VAT that is not recoverable. That is totally unacceptable, particularly at a time when there is no real increase in the amount of money being given to charities, and more pressure is being put upon them because of various constraints on public expenditure and local authorities and the NHS being unable to provide services. I hope that the matter will be examined more seriously. If people eventually decide not to give their time or money to charities, the taxpayer will have to pay much more.
On 11 January, the House debated VAT on historic tramways and railways. I hope that it is muddled thinking on the part of the Government and nothing worse, but they are completely out of step with reality in their attitude towards VAT and those involved in providing charitable services.

Mr. Thomason: Can the hon. Gentleman explain how he would seek to differentiate between the trading activities of charities, which are in direct competition with others who are paying VAT, and the non-trading activities of charities for which he would argue that relief was appropriate?

Mr. Etherington: I am not trying to avoid the question, but I am short of time. I accept that the hon. Gentleman


raises a fair point. My answer is that I would do that with some difficulty. It is a problem, just as it is difficult to decide what is a bona fide charity on moral grounds rather than on strict legal terms. I cannot say much more than that. I agree that the problem needs to be addressed, but it could be overcome if the will were there.
It was originally the intention to put VAT on private railways, almost all of which are based on a charitable concept. They are not profit-making organisations; they provide a service and keep part of our heritage intact. The national tramway museum at Crich is a national asset and should be paid for by the Government, but it is not. Because of their muddled thinking on VAT, the museum will have to find an extra £35,000 a year. If it were a railway and not a museum, or if it did not provide rides on trams, it would not have that problem. 
It is all part of the same muddled thinking. I wish to bring it to the Minister's attention to see whether some of the problems can be put right. We are not talking about vast sums of money. Relief from VAT for charities will not bankrupt the country. After the recent fiasco on VAT, one prominent Minister stated that it required only another 1p on income tax. I admired him for saying that. We are talking about a problem that is nothing like as large, but probably could be dealt with by consequential adjustment.
I hope that the Minister will take on board the two points that I have raised and I thank you once again, Mr. Deputy Speaker, for your tolerance.

Mr. Alistair Darling: I am grateful to my hon. Friend the Member for Sunderland, North (Mr. Etherington) for being brief, and to other hon. Members who have curtailed their remarks so that all those who wished to contribute to the debate were able to do so. My hon. Friend the Member for Sunderland, North made some useful points about charities, to which we will return in Committee.
The Finance Bill should be the cornerstone of the Government's economic and, therefore, political strategy and we are entitled to examine it to see where they are going and to identify their sense of direction and purpose—if they have one any more. We look in vain, because the debate has told us what the Opposition already suspected—that the Government have only one objective: to win the next election at whatever cost. All their efforts will go into promoting the interests of the Conservative party; the interests of the country will take second place every time. It is a short-term aim from a short-term Government and their policy is what we have now come to expect.
Conservative Members believe still that all they need do is cut the basic rate of income tax and they will win. That will not work. The Conservatives fought the 1992 general election on the specific pledge not to introduce in last November's Budget tax rises equivalent to 7p in the pound—the biggest in Britain's history.
At the last election, the Government promised that they would not have to increase taxes. Until last autumn, the Chancellor told us that whatever he said on a wet night in Dudley did not matter. In December, he got a resounding answer from the people of Dudley. This afternoon, we heard an excellent speech from my hon. Friend the new Member for Dudley, West (Mr. Pearson), who not only paid a generous tribute to his predecessor, Dr. John

Blackburn, but showed that he has a substantial knowledge of business—a knowledge sadly lacking among a number of Conservative Members. I am glad that my hon. Friend has agreed to serve on the Committee that is to consider the Bill.
As the Prime Minister made clear yesterday, at a Conservative party event hosted at public expense at Downing street, all the Government's efforts are geared to 1996. Even their limited help for the long-term unemployed will not come into play until April 1996, because the Government want a drop in unemployment in the summer of that year—not in the summer of 1995, when the public might forget all about it. The needs of the long-term unemployed take second place to the cynical needs of the Tory electoral cycle. This tired and discredited Government have only one card left to play—cutting the basic rate of income tax by a few pence regardless of the consequences. That will not work either, as my hon. Friend the Member for Edinburgh, Leith (Mr. Chisholm) said.
Let us examine some of the killer facts about which we have heard so much. Where better to start than the Maples report prepared by the deputy chairman of the Tory party. He said that
the reality is now that the rich are getting richer on the backs of the rest, who are getting poorer.s
Reference to that growing division was made by my hon. Friend the Member for Newham, North-East (Mr. Timms). The killer facts about tax are simple and well understood. Killer fact No. 1 is that the British people have been landed with the biggest tax increase in Britain's history, equivalent to 7p in the pound, and that they pay value added tax on domestic fuel for the first time ever. The public will remember that the Conservatives threatened to increase that tax to 17.5 per cent. At the next general election, the public will have every reason to believe that if the Conservatives are returned to power, they will increase VAT again.
It is no use the hon. Member for Bridlington (Mr. Townend)—who is not in his place—moaning, as he does regularly, about the Government's tendency to increase tax and their failure to curtail public spending, because it is at the same level now as 16 years ago. The Tories never have been and are not the party of low tax. They tax for the wrong reason—economic failure.
Killer fact No. 2 is that families pay more of their income in tax than at any time since the Conservatives first came to power in 1979, and they will have to pay more yet again from April.
Killer fact No. 3 is that public spending is the same now as in 1979. The Secretary of State for Wales complained about that two weekends ago, yet he does not seem to realise that he has been supporting a Government who have not kept even that foolish promise made 16 years ago—all that from a Government who said that they would not increase taxes because they had no need to do so.
The gap between the highest and lowest-paid worker is greater than at any time since records began in 1886. Unfairness is a hallmark of Tory tax policy. For all the criticisms that we hear from Conservative Members about a minimum wage, Government policy means that the taxpayer is subsidising bad employers. We pay for that, and there can never be any justification for it. The Government believe that there is no floor below which wages should not be allowed to fall.
No wonder the Maples report stated:
There is a feeling of powerlessness and insecurity about jobs, housing, health service, business, family values and crime.
If the Tories plan a giveaway Budget in 1995, they will be quite prepared to increase interest rates before that to calm the markets. The markets remember the inflationary effects of the Lawson boom that started in 1988.
The Chancellor, as is his wont, was disarmingly frank during the Budget debates towards the end of last year because he made it clear that decisions on interest rate rises would, among other things, depend on political considerations. There we have it. Despite all the talk of openness, of monetary responsibility and of publishing minutes and so on, at the end of the day, there is only one objective: Tory electoral gain.
The Governor's advice on interest rates will be swept aside—that may please my right hon. Friend the Member for Llanelli (Mr. Davies)—if it stands in the way of the Tory election strategy. The Chancellor has made it clear that he is quite prepared to do that because the Government have no strategy for the country. Their only strategy is self-interest.
The Government have no strategy for investment. Of course the economy is beginning to recover, but as my hon. Friend the Member for Durham, North (Mr. Radice) said, 'people have yet to feel it. That is because the United Kingdom had the deepest recession of any European country in 1991 and 1992, which is why the UK's growth in the past couple of years has been stronger than it may otherwise have been—not because, somehow, the Conservatives have managed to manage the economy more effectively. It is because we are emerging from the deepest recession that we have experienced.
When one considers the Tory record over 16 years, one sees that we have had the lowest growth rate of any major European country in G7 and we still have the fear of inflation. Those Conservative Members who claim that we live in a climate of low inflation and that somehow it is here to stay do not realise that there is a very real risk that inflation will start to rise as the capacity of the economy is used up because the Government have run down the manufacturing capacity of the economy over the past 15 or 16 years.
Let us look at two more Maples killer facts. Output is now only 2.5 per cent. higher than it was before the recession began. Manufacturing output is still lower than it was at the beginning of 1990. Investment in plant and machinery, a key indicator, is 30 per cent. lower than at the start of 1990.
What do the Government have to offer? In his speech, the Chief Secretary made a lot about tax loopholes and he claimed that the Chancellor was attempting to close some tax loopholes in his Budget. Indeed, the Chancellor closed some tax loopholes, just three weeks after the same Chief Secretary said that there were no tax loopholes to close. The fact is that there are tax loopholes to close if the Government choose to close them.
Let us look at the flagship policy of the Budget—it must have been the flagship policy because it was the only policy which warranted a separate press release on the day of the Budget—which was the proposal to establish venture capital trusts: son of the discredited business expansion scheme, the granny farmers charter. Savings

should be encouraged because, without them, there will be no money for investment. But, if the Government are going to intervene to use taxpayers' money to encourage saving and investment, they should do it properly and effectively.
Venture capital trusts will provide one of the biggest tax breaks that this country has ever seen. They will enable people, as has been said, to avoid paying tax, yet there is no guarantee that the investment will go where it is needed. Indeed, it is likely—all the experts and advisers say this—that it will go to the easy options, to the places where the investment would have gone anyway, regardless of any incentive. We the taxpayers will subsidise the granny farmers of this country. The hon. Member for Bridlington called it tax concessions. I do not care whether he calls it concessions or tax breaks; the fact is that we will pay for it.
The Government's profligacy on tax relief beggars belief. Why, for example, did not they try to target that investment? They could have considered corporate venture capital trusts, which might have encouraged private investment and partnership with public money in rebuilding infrastructure or encouraged investment in high technology or in the high-risk areas that the country needs. No mention was made, for example, of regional development, which we think is so important. The Government's first thought was not for investment in the public interest but for those who want to avoid paying tax.
We shall table amendments to ensure that investment goes where it is needed—into areas where there is a risk, the very areas in which Britain should be competing. Indeed, the hon. Member for Milton Keynes, South-West (Mr. Legg) mentioned a proposal to taper capital gains tax to encourage long-term attitudes. We suggested that and we support it, yet we see nothing.
What about the Government's private finance initiative? It seems to have run into the sand. Since the initiative was announced in 1992, only £500,000 of private capital has been levered into public sector projects. At the same time, however, Government investment is expected to be £4.5 billion lower than in the past two financial years. In other words, there is a cut in investment. In his Budget statement last autumn, the Chancellor announced reductions in capital expenditure, particularly in housing and road building. Rail investment, about which we have heard so much, has already been cut.
The Government do not understand how to use incentives in the public interest, but they have a very sympathetic ear for those who are ready to exploit every incentive for private gain. They continue to turn a blind eye to the activities of a greedy minority of executives who insist on paying themselves more for doing less.
The hon. Member for Finchley (Mr. Booth) said that all that was happening in the privatised utilities—in the gas and electricity industries—was that people were bringing themselves up to world standards. When services come up to world standards and prices come down to world standards, those people can begin to consider paying themselves for effort. However, when we consider that the salary of the chairman of North West Water has risen 571 per cent., we wonder how on earth the Government can justify such figures.
We welcome the CBI initiative to set up a working party to encourage better corporate governance. Effective corporate governance might be the best way to resolve the problem. We believe that those who work hard, and the


companies that grow, should be rewarded for their efforts provided that it is quite clear that they are being rewarded for increased effort and increased productivity. We believe that employees should be rewarded by share options, provided that those share options are earned and not simply given as a super-bonus. Those rewards should be available from the boardroom to the shop floor.
It is typical of this Government that when the Institute of Directors, which is not normally an ally of the Labour party, the CBI and the Labour party call for action, the Government do absolutely nothing. What has happened to the Cabinet sub-committee that was set up to deal with that matter? It has still to report, but perhaps it has been wound up. Lord Hanson said that the dividend study set up by the previous Financial Secretary should be stopped; perhaps Lord Hanson has told the Prime Minister to stop the current exercise as well. Perhaps rather too many Ministers intend to sit in those same boardrooms and claim the bloated salaries and share options that we have seen in the privatised utilities.
The Government have no strategy for growth. Let us consider another killer fact: the United Kingdom's growth record since 1979 is poor. It is lower than any other major European country or G7 country. What are the Government proposing? They do not propose to invest in education. Is it not ridiculous that, when we have 3 million unemployed people, we have skill shortages, which mean that inflationary pay increases are given to some while others go without work?
Cuts in local government spending will undoubtedly mean cuts in education and in the number of teachers in schools. The hon. Member for Bridlington should bear that in mind. We will see savage cuts in local authority spending, of which the Government will wash their hands.
That is no way in which to invest in the future. Without growth, public spending will never be reduced. The fact that we have high unemployment is one reason why Government borrowing has been so substantial.
The Government's competition policy is equally blinkered and confused. Mention has been made of the tax consequences on the brewing and whisky industries, which are major employers and major revenue earners for this country. The illegal importation of drink and the bootleg trade are flourishing, yet the Government have cut the number of people employed in Customs and Excise.
The Government talk about deregulation, but the Bill proposes to extend vehicle excise duty in a way that will strangle businesses in red tape. The proposals for self-assessment of tax, which we welcome in principle, appear to be drowning in volumes of paperwork and confusion. If the proposals simplify matters, then all to the good. However, with confusion and uncertainty will come scope for evasion.
People will also make honest mistakes. There seems to be no procedure for resolving those mistakes and misunderstandings. We need simply look at the forms in circulation from the Department of Social Security to see the complications that the Government have managed to create for people.
I hope that the Government will take to heart hon. Members' criticisms about the need to try to simplify future Finance Bills. Much legislation that is now going through Parliament has not been sufficiently scrutinised simply because of the volume of it and the lack of time available.
The Government have no realistic strategy for the country. They should know that we cannot compete in this world on low wages and low skills. We can compete on excellence and on goods that offer added value. The financial services industry pays well and it competes around the globe, as do the car manufacturing and electronics industries. Inward investors are looking for motivated and skilled work forces. We will not have them by driving down wages and depending heavily on casual labour. To succeed, we need a highly motivated and highly skilled work force.
The Government have no policy for maintaining the social fabric of this country. They are keen to lecture others on their behaviour and they are keen to lament falling standards, yet they turn a blind eye to the consequences of their policies over the past 16 years.
We believe that economic efficiency and social justice go hand in hand. We all live in the same society—what happens to our neighbour matters in social and economic terms—yet, in the past two weeks, the Secretaries of State for Social Security, for Employment and for Wales, all of whom increasingly appear to see this country from a different planet, have been repeating their message that, in order to succeed, expectations must be suppressed, standards must fall and society and the idea of it must be denigrated. They say that people are no different from any other commodity at the disposal of the market.
It is no wonder, therefore, that most people see the Government as out of touch with reality and their own experience of life. We see that in the Government's attitude to helping those who have lost their jobs and who cannot pay their mortgages. They do not seem to realise the cost of insuring mortgage repayments and the fact that, increasingly, insurers will either not insure people or will demand premiums that are out of the reach of ordinary people.
We see the same blinkered attitude with the proposal to use the tenant as the battering ram against high rents. It will take more than a small reduction in the basic rate of tax to win back support for the Government. People are uncertain and fearful; they fear for their jobs. Everyone knows someone who has lost his or her job and who has little prospect of finding another. We have a new generation of young people who have never known a long-term, steady job in their lives. Sadly, it appears that, under the Government, they never will.
We see a new phenomenon of people in middle management who have been laid off in their 40s and who are unlikely ever again to find a full-time job. We know the consequences of that not just in social tension but in economic terms and what it will mean in terms of pension contributions and support that might be necessary in future. People fear for their jobs. They see full-time jobs become part-time jobs, or even no job at all. They fear for their pensions and security in their old age. They fear for their children and for their education. Increasingly, people fear for their safety at home. Nearly everyone now knows somebody who has been a victim of crime.
People see Cabinet Ministers who regard the country as a test bed for ever more unpleasant and fanciful ideology. They see a country that is increasingly run by a rotten state of quangos stuffed with Tory nominees. They do not trust the Government. They do not believe anything that the Government say and, deep down, the Government and their supporters now know that. The Government have no sense of direction. They have no


purpose in remaining in office. They live for the moment, and they have run out of steam. The Finance Bill shows that, and it deserves to be rejected.

The Financial Secretary to the Treasury (Sir George Young): Much has already been written and spoken about this year's Finance Bill. Perhaps the most cryptic comment was that of a tax partner reported in The Daily Telegraph of 7 January, who commented:
the Bill is too long but also too short.
Another tax partner was even blunter:
I opened the Bill, blinked, and shut it. Then I looked again and saw clause 3 which was about alcoholic ingredients relief. Clause 4 was about denatured alcohol. At that point I decided what was needed and disappeared.
Hon. Members have added their own comments in today's debate, and I shall try to deal with some of them, but the debate has also been useful in highlighting specific issues on which I am sure that the Standing Committee will want to focus.
The hon. Member for Oxford, East (Mr. Smith) started by saying that the Bill was damaging and divisive, but his speech did not sustain that remark. He mentioned two issues and I want to deal with both. The first was the blind person's allowance, but what he did not mention was that it was doubled in 1990–91 from £540 to £1,080 and then further increased to £1,200 in 1994–95.
Before the hon. Gentleman presses us to far on that allowance, he might like to reflect on the fact that it is of no benefit to blind people whose incomes are not high enough. It is also somewhat restrictive in that it does not help the partially sighted. There may be better ways to help the blind and partially sighted than focusing exclusively on the blind person's allowance. It is more conventional to use the social security system to help people with that sort of disability.
The hon. Gentleman's second point was on the impact of the deep discount provisions in clauses 76 and 77. He conceded that there were good grounds for closing the loophole, but he was worried about the impact on housing associations. I have received and am carefully considering representations from housing associations whose borrowing is a very small percentage of the borrowing that will be affected by the clauses.
I agree with what the hon. Gentleman said about the importance of simplifying the tax system; indeed, that has been a theme throughout the debate and I shall say a word or two about that in a moment. He was wrong in what he said about those who did not want to go the whole distance with self-assessment. They have the option of not calculating the liability and instead completing their tax returns broadly as they do at the moment.
My hon. Friend the Member for Stamford and Spalding (Mr. Davies) again spoke about the complexity of legislation. One significant development in that area is the formation of a high-level committee—the tax law review committee—by the Institute for Fiscal Studies. That committee brings together a wide range of talent, with members drawn from industry, commerce, academia, the judiciary and retired civil servants, under the presidency of Lord Howe but with the hon. Member for Edinburgh, Central (Mr. Darling) also a member.
The committee has set itself an initial programme of three projects all going to the very structural foundations of the present tax code. Perhaps of most relevance to our debate is its project to rewrite part of the existing code in shorter, simpler, more user-friendly terms. That is designed to test whether it would be feasible to recast all or most of the current tax code in that way. The Government are following that work with close interest and the Inland Revenue is giving the committee its full, active and enthusiastic support.
I do not think that there are any easy answers. It has taken more than 100 years to build up the existing body of tax law and any wide-ranging rewrite will be a major task. However, I hope that there is real potential for some worthwhile changes in the way that tax provisions are formulated.
The right hon. Member for Llanelli (Mr. Davies) made a rather nostalgic speech. He spoke of the good old days of fine tuning, domestic credit expansion and monetarism. He needs to reflect on the outcome of those policies, especially those that ended in 1979, compared with the policies that were so commendably described by the Select Committee in its report published a few days ago.

Mr. Denzil Davies: I simply made the point that we were still in the era of fine tuning. Every month, the Chancellor sits with the Governor of the Bank of England fine-tuning the British economy.

Sir George Young: Another point on which the right hon. Gentleman was not quite accurate was when he said that my right hon. and learned Friend the Chancellor had handed over control to the Governor of the Bank of England. He has not—my right hon. and learned Friend makes the decisions. However, it is now a much more open process than previously and the Governor has some discretion on timing.
My hon. Friend the Member for Milton Keynes, South-West (Mr. Legg) and others of my hon. Friends referred to capital gains tax and pressed the case for reform. With a Budget that is broadly neutral there would be difficulties in making a major radical change in CGT. My hon. Friends should remember that CGT performs an essential role in preventing tax avoidance. Without it, or even with it at a very low rate, there would be a strong incentive for artificial schemes to convert income into capital gains. The CGT rate is 40 per cent., in line with the higher rate of income tax. There is no significant anomaly in that.
The hon. Member for Gordon (Mr. Bruce) said that the tax level was too high, but he made no real suggestion on how he would make significant cuts in public expenditure. He can examine the Government's hospitality expenditure, but there are no major savings to be made there. He said that he would vote against the Government because of—in his words—their failed economic policies. Does the hon. Gentleman recognise the following words? It is stated that
the economy is now recovering strongly. Inflation is at its lowest level since the 1960s, and relatively stable. The PSBR is falling and there has been a substantial improvement in the current account. GDP has been growing above its trend rate for over a year, and is forecast to continue to do so for some time without exerting upward pressure on prices. Registered unemployment has been falling since the winter of 1992–93.


The quote is from the third report of the Select Committee on the Treasury and Civil Service. The hon. Gentleman added his name to that report. It is difficult to understand how he sustains the argument that a week ago it was all so good but somehow today it is all so bad.
My hon. Friend the Member for Wyre Forest (Mr. Coombs) paid tribute to the small business measures in the Bill. He rightly made the point that the shape of the recovery is different from that of other recoveries in that it is investment and export led.
We then had the maiden speech of the hon. Member for Dudley, West (Mr. Pearson). He paid a generous tribute to John Blackburn which was well received by hon. Members on both sides of the House. He described the changing demographic and industrial nature of his constituency. A few years ago, I worked with the hon. Gentleman on the urban trust, which helped to fund small, worthwhile projects in inner cities.
It was clear from the hon. Gentleman's speech that he retains an interest in the promotion of small businesses. I do not want to cause him any difficulties on the occasion of his maiden speech, but the tone of his description of venture capital trusts was significantly different from that of his hon. Friend the Member for Edinburgh, Central. The hon. Member for Dudley, West said that he welcomed the purpose behind the establishment of VCTs. One would not expect him in his maiden speech to launch a frontal attack on his Front-Bench spokesman, but he has some useful ideas on the role of tax incentives in promoting business and partnerships. We would welcome him if he were to serve on the Committee that considers the Bill.

Mr. Darling: The right hon. Gentleman is being a little bit unfair to my hon. Friend the Member for Dudley, West (Mr. Pearson). All of us welcome the idea of encouraging investment and of saving. Our complaint about the VCT device is that it simply provides a tax break and that it will not channel investment where it is needed.

Sir George Young: I hope to say more about venture capital trusts in a moment, but the Labour party is making a big mistake in launching its frontal attack on VCTs, which offer the potential to help growing businesses and to create more jobs. Everyone who has considered the issue agrees that a funding problem exists for small businesses that want to get out of the nursery. VCTs are the result of much consultation. They have been broadly welcomed. The Labour party is ill advised to come out against them at this early stage.
My hon. Friend the Member for Bridlington (Mr. Townend) said that public expenditure was too high and that the Bill was too long. He will recognise that, in the past two public expenditure rounds, the Chief Secretary to the Treasury and my right hon. and learned Friend the Chancellor have taken some £42 billion off planned public expenditure. On shorter Finance Bills, a moment ago I mentioned the possibility of simplifying the legislation.
The hon. Member for Durham, North (Mr. Radice), who is not in his place at the moment, gave us a lecture on how and when to cut taxes. As the Labour party voted against nearly all the tax cuts in the 1980s, I am not sure that that is a subject on which it can give lectures. We treat the advice with some caution.
My hon. Friend the Member for Hastings and Rye (Mrs. Lait), a Member representing a coastal region, spoke about cross-border shopping. As she knows, cross-border shopping is closely monitored. More than 250 customs staff are on single market duties, the majority acting against smuggling. The Government will continue to work with their European Union partners towards closer approximation of duties. The forthcoming review of EU-wide excise duties will give us the first opportunity.

Sir Teddy Taylor: Will the Minister give way?

Sir George Young: No. I do not think that my hon. Friend has been here during the debate and, out of courtesy to hon. Members who have asked specific questions, I should like to make some progress.
My hon. Friend the Member for Hastings and Rye made the point that venture capital trusts should be focused on smaller companies. She will know that we have put a £1 million limit on subscriptions to achieve that objective.
A number of hon. Members, mainly Opposition Members, asked about work incentives. They said that there was nothing in the Bill to create jobs, but there is—the venture capital trusts. The major work incentive proposals, however, are working social security proposals. That is why they are not in the Finance Bill.
The hon. Member for Darlington (Mr. Milburn) asked why measures to help the long-term unemployed were not introduced sooner, but his concerns were overstated. The 0.6 per cent. cut in employers' national insurance rates for the low-paid starts this April. The extra £10 per week for family credit claimants who work full time starts in July. Together, those two major measures are worth £340 million in 1995–96. Extra provisions are also being made in 1995–96 for more work trials, new workstart pilots, more jobmatch pilots and the national extension of other schemes. The cost of the one-year holiday in national insurance contributions is £45 million. That is relatively small compared with the other measures. It is not the case that we have held back the more expensive measures; they were delayed because primary legislation was needed.

Mr. John Townend: Will my right hon. Friend deal with the point raised by my hon. Friend the Member for Wyre Forest (Mr: Coombs) and me about the problem of increasing the licence fees on amusements and the removal of the vehicle licence concession for farmers?

Sir George Young: On the first point, my hon. Friend the Paymaster General has agreed to meet, in the near future, trade associations that are worried about those proposals. The committal motion provides an opportunity to debate in more detail on the Floor of the House the vehicle excise duty measure.
The hon. Member for Darlington wrongly implied that the better-off were making a lower contribution to the income tax burden. He is wrong. The top 10 per cent. are now paying 44 per cent. of the overall tax take compared to some 35 per cent. in 1979.
My hon. Friend the Member for Finchley (Mr. Booth) spoke about absolute poverty. He was right so to do. If he looks at the fortunes of those in the bottom decile in terms of car ownership, access to a telephone, access to decently heated houses and ownership of video recorders, he will see that they enjoy a higher standard of living now than


in 1979. That is the point that really matters. I should like to write to my hon. Friend about black tobacco when I have consulted my right hon. and hon. Friends.
Much of the debate has focused on tax. Opposition Members have quoted some rather selective figures. Real personal disposable income is expected to rise by 1.5 per cent. next year; that should mean that, on average, households will be about £5 a week better off after taking account of both tax and inflation. Real household disposable income per head has risen by almost half since 1979. The real take-home pay of a one-earner couple on average earnings with two children has risen by more than £80 a week since 1978–79.
One point has not come out so far in the debate. The difference between us and the Labour party is that our instinct is to cut taxes and we will make cuts when they can be afforded. We know, and everyone outside knows, that the Opposition are, by nature, high spenders and high taxers. They are also high borrowers. They borrowed on average almost 7 per cent. of national income a year when they were in office. Since 1979, borrowing has averaged 2 per cent. Borrowing undermines confidence. It is simply a means of deferring taxation.
The Government believe in a more principled approach. We take tough decisions to increase taxes when it is necessary to sustain growth and help reduce unemployment. The Labour party preferred to increase borrowing, which disguised rather than dealt with the problem and stored up difficulties for the future. Of course, the Labour party voted against almost every Conservative tax cut in the 1980s. It presided over a top rate of tax of 98 per cent. It has no credibility on the tax issue. It is in no position to challenge the Government.
I wish to say a few more words about venture capital trusts. Some firms with high growth potential are sometimes unable to access normal sources of finance such as the stock market or the clearing banks. They have special characteristics which the financial system is unable or unwilling to accommodate; hence, there is a funding gap which the industrial finance initiative has identified. It has also been recognised by most serious commentators on the United Kingdom scene.
Our approach, through venture capital trusts—encouraging investment in risk capital—is a better approach than the idea of regional development agencies using public funds and run by civil servants, which was the Labour party's response. The proposals for venture capital trusts in the Bill are the result of painstaking consultations that have taken place during the past year. It is fair to say that the balanced package that we proposed has been widely welcomed by the venture capital industry.
The measures will undoubtedly encourage the setting up of new businesses and new investment in expanding smaller firms. They will bring investment in private companies within the grasp of ordinary investors. There is a high risk in that area, however. It is a higher risk than investment in brand-name, quoted companies. Potential investors in venture capital trusts will need to be aware of those considerations. The proposed tax reliefs are designed to reflect the risks, not to afford a scam for higher rate taxpayers. I have tried to describe the scheme and why the Government propose it. It is a serious response to a serious problem and the Labour party is misguided in its attempt to oppose it.
The right hon. Member for Chesterfield (Mr. Benn) gave the game away on the "Today" programme last Thursday. Speaking with candour, if not with tact, he said of the Labour party:
Nobody really knows what our policies are.
That concern was shared by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). Writing in The Observer on Sunday, he said:
The Labour leadership has to decide if it is going to welcome serious argument and shepherd it towards a constructive conclusion, or simply stall—promising as little as possible for as long as possible.
It is clear from today's debate which option the Labour party has chosen. Today is the eighth day in two months when we have debated the economy and on each occasion we Conservatives have asked the same questions: would a Labour Government spend more or less than a Conservative Government; would a Labour Government tax more or less than a Conservative Government; and, would a Labour Government borrow more or less than a Conservative Government? Would their inflation target be higher or lower than ours? We are no wiser than we were at the beginning of the debate, two months ago.
I read in The Guardian last Thursday that the Leader of the Opposition told the shadow Cabinet last week:
All public spending and tax questions must be referred to the shadow Chancellor's office.
I must tell members of the Opposition Front-Bench team who are thinking of submitting their questions for an answer that the system simply does not work. One does not get any answers. We are standing, respectfully, at the head of the queue with our questions. The questions that we ask are not difficult. They do not require a detailed look at the books before they can be answered. They are questions of broad principle that any aspiring Government ought to be able to answer. As the leader of the Labour party said when he emerged from his fraternal meeting with Members of the European Parliament last week:
It is important to be frank with people.
Indeed; and in no area is it more important than in economic policy.
We would understand it if the Opposition said, "We can't give you the details, but here is the strategy. This is what we believe in. We'll fill in the policies later." We would accept that, but they have done exactly the opposite. They have given us a lot of little details—for example, they would reduce the maximum pay-out of the national lottery and introduce a levy on cinema tickets—but they have no strategy. There is a total vacuum, within which the policies float around. They are all dressed up and have nowhere to go.
It is no good referring to the shadow Budget, because it was not a Budget at all. It did not say how much should be spent or how much should be raised in taxation. It was a random collection of uncosted ideas, which fell foul of the Trades Descriptions Act 1968 by being called a Budget. As a result, there is confusion and suspicion about Labour's plans.
Mr. Bevins wrote:
The Observer has now been told by a senior party source that at the very least Labour would promise to keep taxes lower than Mr. Clarke's Red Book projections.
Is that true? Opposition Members would like to know, as would we. If it were true, it would represent, in Mr. Bevins's words,


a clear break from Labour tradition, which has always defended the need for strong tax revenues to finance the welfare state.
If the Labour party wants to underbid us on taxes, it must underbid us on spending. That would be not so much a clear break from Labour's tradition as its total burial.
Labour's economic policy is one of grudge and fudge. It is no substitute for well-thought-out, relevant, effective policies that bring hope and help to the unemployed, foster an enterprise culture, attack the burdens on small businesses, bring public finances back to balance and build on and sustain recovery. Such policies are included in the Bill, which I urge the House to support.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 318, Noes 277.

Division No. 38]
[9.59 pm


AYES


Ainsworth, Peter (East Surrey)
Clarke, Rt Hon Kenneth (Ru'clif)


Aitken, Rt Hon Jonathan
Clifton-Brown, Geoffrey


Alexander, Richard
Coe, Sebastian


Alison, Rt Hon Michael (Selby)
Colvin, Michael


Allason, Rupert (Torbay)
Congdon, David


Arbuthnot, James
Conway, Derek


Arnold, Jacques (Gravesham)
Coombs, Anthony (Wyre For'st)


Arnold, Sir Thomas (Hazel Grv)
Coombs, Simon (Swindon)


Ashby, David
Cope, Rt Hon Sir John


Aspinwall, Jack
Cormack, Sir Patrick


Atkins, Robert
Couchman, James


Atkinson, David (Bour'mouth E)
Cran, James


Atkinson, Peter (Hexham)
Currie, Mrs Edwina (S D'by'ire)


Baker, Rt Hon Kenneth (Mole V)
Curry, David (Skipton &amp; Ripon)


Baker, Nicholas (North Dorset)
Davies, Quentin (Stamford)


Baldry, Tony
Davis, David (Boothferry)


Banks, Matthew (Southport)
Day, Stephen


Banks, Robert (Harrogate)
Deva, Nirj Joseph


Bates, Michael
Delvin, Tim


Batiste, Spencer
Dicks, Terry


Beggs, Roy
Dorrell, Rt Hon Stephen


Bellingham, Henry
Douglas-Hamilton, Lord James


Bendall, Vivian
Dover, Den


Beresford, Sir Paul
Duncan, Alan


Biffen, Rt Hon John
Duncan Smith, Iain


Bonsor, Sir Nicholas
Dunn, Bob


Booth, Hartley
Durant, Sir Anthony


Boswel, Tim
Dykes, Hugh


Bottomley, Peter (Eltham)
Eggar, Rt Hon Tim


Bottomley, Rt Hon virginia
Elletson, Harold


Bowis, John
Emery, Rt Hon Sir Peter


Boyson, Rt Hon Sir Rhodes
Evans, David (Welwyn Hatfield)


Brandreth, Gyles
Evans, Jonathan (Brecon)


Brazier, Julian
Evans, Nigel (Ribble Valley)


Bright, Sir Graham
Evans, Roger (Monmouth)


Brooke, Rt Hon Peter
Evennett, David


Brown, M (Brigg &amp; Cl'thorpes)
Faber, David


Browning, Mrs Angela
Fabricant, Michael


Bruce, Ian (Dorset)
Fenner, Dame Peggy


Burns, Simon
Field, Barry (Isle of Wight)


Burt, Alistair
Fishburn, Dudley


Butcher, John
Forman, Nigel


Butler, Peter
Forsyth, Rt Hon Michael (Stirling)


Butterfill, John
Forsythe, Clifford (S Antrim)


Carlisle, John (Luton North)
Forth, Eric


Carlisle, Sir Kenneth (Lincoln)
Fowler, Rt Hon Sir Norman


Carrington, Matthew
Fox, Dr Liam (Woodspring)


Carttiss, Michael
Fox, Sir Marcus (Shipley)


Cash, Wiliam
Freeman, Rt Hon Roger


Channon, Rt Hon Paul
French, Douglas


Chapman, Sydney
Fry, Sir Peter


Churchill, Mr
Gale, Roger


Clappison, James
Gallie, Phil


Clark, Dr Michael (Rochford)
Gardiner, Sir George





Garel-Jones, Rt Hon Tristan
McNair-Wilson, Sir Patrick


Garnier, Edward
Madel, Sir David


Gill, Christopher
Maginnis, Ken


Gillan, Cheryl
Maitland, Lady Olga


Goodlad, Rt Hon Alastair
Malone, Gerald


Goodson-Wickes, Dr Charles
Mans, Keith


Gorman, Mrs Teresa
Marland, Paul


Grant, Sir A (SW Cambs)
Marlow, Tony


Greenway, Harry (Ealing N)
Marshall, John (Hendon S)


Greenway, John (Ryedale)
Marshall, Sir Michael (Arundel)


Griffiths, Peter (Portsmouth, N)
Martin, David (Portsmouth S)


Grylls, Sir Michael
Mates, Michael


Gummer, Rt Hon John Selwyn
Mawhinney, Rt Hon Dr Brian


Hague, William
Mellor, Rt Hon David


Hamilton, Rt Hon Sir Archibald
Merchant, Piers


Hampson, Dr Keith
Mills, Iain


Hanley, Rt Hon Jeremy
Mitchell, Andrew (Gedling)


Hannam, Sir John
Mitchell, Sir David (NW Hants)


Hargreaves, Andrew
Moate, Sir Roger


Harris, David
Molyneaux, Rt Hon James


Haselhurst, Alan
Monro, Sir Hector


Hawkins, Nick
Montgomery, Sir Fergus


Hawksley, Warren
Needham, Rt Hon Richard


Hayes, Jerry
Nelson, Anthony


Heald, Oliver
Neubert, Sir Michael


Heath, Rt Hon Sir Edward
Newton, Rt Hon Tony


Heathcoat-Amory, David
Nicholls, Patrick


Hendry, Charles
Nicholson, David (Taunton)


Heseltine, Rt Hon Michael
Nicholson, Emma (Devon West)


Hicks, Robert
Norris, Steve


Higgins, Rt Hon Sir Terence
Onslow, Rt Hon Sir Cranley


Hill, James (Southampton Test)
Oppenheim, Phillip


Hogg, Rt Hon Douglas (G'tham)
Ottaway, Richard


Horam, John
Page, Richard


Hordern, Rt Hon Sir Peter
Paice, James


Howard, Rt Hon Michael
Patnick, Sir Irvine


Howarth, Alan (Strat'rd-on-A)
Patten, Rt Hon John


Howell, Rt Hon David (G'dford)
Pattie, Rt Hon Sir Geoffrey


Howell, Sir Ralph (N Norfolk)
Pawsey, James


Hughes, Robert G (Harrow W)
Peacock, Mrs Elizabeth


Hunt, Rt Hon David (Wirral W)
Pickles, Eric


Hunt, Sir John (Ravensbourne)
Porter, Barry (Wirral S)


Hunter, Andrew
Porter, David (Waveney)


Jack, Michael
Portillo, Rt Hon Michael


Jackson, Robert (Wantage)
Powel, William (Corby)


Jenkin, Bernard
Redwood, Rt Hon John


Johnson Smith, Sir Geoffrey
Renton, Rt Hon Tim


Jones, Gwilym (Cardiff N)
Richards, Rod


Jones, Robert B (W Hertfdshr)
Riddick, Graham


Jopling, Rt Hon Michael
Robathan, Andrew


Kellett-Bowman, Dame Elaine
Roberts, Rt Hon Sir Wyn


Key, Robert
Robertson, Raymond (Ab'd'n S)


Kilfedder, Sir James.
Robinson, Mark (Somerton)


King, Rt Hon Tom
Roe, Mrs Marion (Broxbourne)


Knapman, Roger
Ross, Wiliam (E Londonderry)


Knight, Mrs Angela (Erewash)
Rowe, Andrew (Mid Kent)


Knight, Greg (Derby N)
Rumbold, Rt Hon Dame Angela


Knight, Dame Jill (Bir'm E'st'n)
Ryder, Rt Hon Richard


Knox, Sir David
Sackville, Tom


Kynoch, George (Kincardine)
Sainsbury, Rt Hon Sir Timothy


Lait, Mrs Jacqui
Scott, Rt Hon Sir Nicholas


Lang, Rt Hon Ian
Shaw, David (Dover)


Lawrence, Sir Ivan
Shaw, Sir Giles (Pudsey)


Legg, Barry
Shephard, Rt Hon Gillian


Leigh, Edward
Shepherd, Colin (Hereford)


Lennox-Boyd, Sir Mark
Shepherd, Richard (Aldridge)


Lester, Jim (Broxtowe)
Shersby, Michael


Lidington, David
Sims, Roger


Lilley, Rt Hon Peter
Skeet Sir Trevor


Lloyd, Rt Hon Sir Peter (Fareham)
Smith, Sir Dudley (Warwick)


Lord, Michael
Smith, Tim (Beaconsfield)


Luff, Peter
Smyth, The Reverend Martin


Lyell, Rt Hon Sir Nicholas
Soames, Nicholas


MacGregor, Rt Hon John
Speed, Sir Keith


MacKay, Andrew
Spencer, Sir Derek


Maclean, David
Spicer, Sir James (W Dorset)






Spicer, Michael (S Worcs)
Trotter, Neville


Spink, Dr Robert
Twinn, Dr Ian


Spring, Richard
Vaughan, Sir Gerard


Sproat, Iain
Viggers, Peter


Squire, Robin (Hornchurch)
Waldegrave, Rt Hon William


Stanley, Rt Hon Sir John
Walden, George


Steen, Anthony
Walker, A Cecil (Belfast N)


Stephen, Michael
Walker, Bill (N Tayside)


Stern, Michael
Waller, Gary


Stewart Allan
Ward, John


Streeter, Gary
Wardle, Charles (Bexhill)


Sumberg, David
Waterson, Nigel


Sweeney, Walter
Watts, John


Sykes, John
Wells, Bowen


Tapsell, Sir Peter
Whitney, Ray


Taylor, Ian (Esher)
Whittingdale, John


Taylor, Rt Hon John D (Strgfd)
Widdecombe, Ann


Taylor, John M (Solihull)
Wiggin, Sir Jerry


Taylor, Sir Teddy (Southend, E)
Wilkinson, John


Temple-Morris, Peter
Willetts, David


Thomason, Roy
Wilshire, David


Thompson, Sir Donald (C'er V)
Winterton, Mrs Ann (Congleton)


Thompson, Patrick (Norwich N)
Winterton, Nicholas (Macc'fld)


Thornton, Sir Malcolm
Wolfson, Mark


Thumham, Peter
Wood, Timothy


Townend, John (Bridlington)
Yeo, Tim


Townsend, Cyril D (Bexl'yh'th)
Young, Rt Hon Sir George


Tracey, Richard



Tredinnick, David
Tellers for the Ayes:


Trend, Michael
Mr. Timothy Kirkhope and Mr. David Lightbown.


Trimble, David





NOES


Abbott, Ms Diane
Clark Dr David (South Shields)


Adams, Mrs Irene
Clarke, Eric (Midlothian)


Ainger, Nick
Clarke, Tom (Monklands W)


Ainsworth, Robert (Cov'try NE)
Clelland, David


Allen, Graham
Clwyd, Mrs Ann


Anderson, Donald (Swansea E)
Coffey, Ann


Anderson, Ms Janet (Ros'dale)
Cohen, Harry


Armstrong, Hilary
Connarty, Michael


Ashton, Joe
Cook, Frank (Stockton N)


Barnes, Harry
Cook, Robin (Livingston)


Barron, Kevin
Corbett, Robin


Battle, John
Corbyn, Jeremy


Bayley, Hugh
Corston, Jean


Beckett, Rt Hon Margaret
Cousins, Jim


Beith, Rt Hon A J
Cox, Tom


Benn, Rt Hon Tony
Cunliffe, Lawrence


Bennett, Andrew F
Cunningham, Jim (Covy SE)


Benton, Joe
Cunningham, Rt Hon Dr John


Bermingham, Gerald
Dafis, Cynog


Berry, Roger
Dalyell, Tam


Betts, Clive
Darling, Alistair


Blunkett, David
Davidson, Ian


Boateng, Paul
Davies, Bryan (Oldham C'tral)


Boyes, Roland
Davies, Rt Hon Denzil (Llanelli)


Bradley, Keith
Davies, Ron (Caerphilly)


Bray, Dr Jeremy
Davis, Terry (B'ham, H'dge H'I)


Brown, Gordon (Dunfermline E)
Denham, John


Brown, N (N'c'tle upon Tyne E)
Dewar, Donald


Bruce, Malcolm (Gordon)
Dixon, Don


Burden, Richard
Dobson, Frank


Byers, Stephen
Donohoe, Brian H


Caborn, Richard
Dowd, Jim


Campbell, Mrs Anne (C'bridge)
Dunnachie, Jimmy


Campbell, Menzies (Fife NE)
Dunwoody, Mrs Gwyneth


Campbell, Ronnie (Blyth V)
Eagle, Ms Angela


Campbell-Savours, D N
Eastham, Ken


Caravan, Dennis
Enright, Derek


Cann, Jamie
Etherington, Bill


Carlile, Alexander (Montgomery)
Evans, John (St Helens N)


Chidgey, David
Ewing, Mrs Margaret


Chisholm, Malcolm
Fatchett Derek


Church, Judith
Field, Frank (Birkenhead)


Clapham, Michael
Fisher, Mark





Flynn, Paul
McCartney, Ian


Foster, Rt Hon Derek
Macdonald, Calum


Foster, Don (Bath)
McFall, John


Foulkes, George
McKelvey, William


Fraser, John
Mackinlay, Andrew


Fyfe, Maria
McLeish, Henry


Galbraith, Sam
Maclennan, Robert


Galloway, George
McMaster, Gordon


Gapes, Mike
McNamara, Kevin


George, Bruce
MacShane, Denis


Gerrard, Neil
McWilliam, John


Gilbert, Rt Hon Dr John
Madden, Max


Godman, Dr Norman A
Maddock, Diana


Godsiff, Roger
Mahon, Alice


Golding, Mrs Llin
Mandelson, Peter


Gordon, Mildred
Marek, Dr John


Graham, Thomas
Marshall, David (Shettleston)


Grant, Bernie (Tottenham)
Marshall, Jim (Leicester, S)


Griffiths, Nigel (Edinburgh S)
Martin, Michael J (Springburn)


Griffiths, Win (Bridgend)
Martlew, Eric


Grocott, Bruce
Meacher, Michael


Gunnel, John
Meale, Alan


Hain, Peter
Michie, Bill (Sheffield Heeley)


Hall, Mike
Michie, Mrs Ray (Argyll &amp; Bute)


Hanson, David
Milburn, Alan


Hardy, Peter
Miller, Andrew


Harman, Ms Harriet
Mitchell, Austin (Gt Grimsby)


Harvey, Nick
Moonie, Dr Lewis


Hattersley, Rt Hon Roy
Morgan, Rhodri


Henderson, Doug
Morley, Elliot


Heppell, John
Morris, Rt Hon Alfred (Wy'nshawe)


Hill, Keith (Streatham)
Morris, Estelle (B'ham Yardley)


Hinchliffe, David
Morris, Rt Hon John (Aberavon)


Hodge, Margaret
Mudie, George


Hoey, Kate
Mulin, Chris


Hogg, Norman (Cumbernauld)
Oakes, Rt Hon Gordon


Home Robertson, John
O'Brien, Mike (N W'kshire)


Hood, Jimmy
O'Brien, William (Normanton)


Hoon, Geoffrey
O'Hara, Edward


Howarth, George (Knowsley North)
Olner, Bill


Howells, Dr. Kim (Pontypridd)
O'Neill, Martin


Hoyle, Doug
Orme, Rt Hon Stanley


Hughes, Kevin (Doncaster N)
Parry, Robert


Hughes, Robert (Aberdeen N)
Patchett, Terry


Hughes, Simon (Southwark)
Pearson, Ian


Hutton, John
Pendry, Tom


Illsley, Eric
Pickthall, Colin


Ingram, Adam
Pike, Peter L


Jackson, Glenda (H'stead)
Pope, Greg


Jackson, Helen (Shef'ld, H)
Powel, Ray (Ogmore)


Jamieson, David
Prentice, Bridget (Lew'm E)


Janner, Greville
Prentice, Gordon (Pendle)


Johnston, Sir Russell.
Prescott, Rt Hon John


Jones, Barry (Alyn and D'side)
Primarolo, Dawn


Jones, Ieuan Wyn (Ynys Mon)
Purchase, Ken


Jones, Jon Owen (Cardiff C)
Quin, Ms Joyce


Jones, Lynne (B'ham S O)
Radice, Giles


Jones, Martyn (Clwyd, SW)
Randal, Stuart


Jones, Nigel (Cheltenham)
Raynsford, Nick


Jowell, Tessa
Reid, Dr John


Keen, Alan
Rendel, David


Kennedy, Charles (Ross, C&amp;S)
Robinson, Geoffrey (Co'try NW)


Kennedy, Jane (Lpool Brdgn)
Rogers, Allan


Khabra, Piara S
Rooker, Jeff


Kilfoyle, Peter
Rooney, Terry


Kirkwood, Archy
Ross, Ernie (Dundee W)


Lestor, Joan (Eccles)
Rowlands, Ted


Lewis, Terry
Ruddock, Joan


Liddell, Mrs Helen
Salmond, Alex


Litherland, Robert
Sedgemore, Brian


Livingstone, Ken
Sheerman, Barry


Lloyd, Tony (Stretford)
Sheldon, Rt Hon Robert


Llwyd, Elfyn
Shore, Rt Hon Peter


Lynne, Ms Liz
Short, Clare


McAllion, John
Simpson, Alan


McAvoy, Thomas
Skinner, Dennis






Smith, Andrew (Oxford E)
Vaz, Keith


Smith, Chris (Isl'ton S &amp; F'sbury)
Walker, Rt Hon Sir Harold


Smith, Llew (Blaenau Gwent)
Wallace, James


Snape, Peter
Walley, Joan


Soley.Clive
Wardell, Gareth (Gower)


Spearing, Nigel
Wareing, Robert N


Speller.John
Watson, Mike


Squire, Rachel (Dunfermline W)
Wicks, Malcolm


Steinberg, Gerry
Wigley, Dafydd


Stevenson, George
Williams, Rt Hon Alan (Sw'n W)


Stott, Roger
Williams, Alan W (Carmarthen)


Strang, Dr. Gavin
Wilson, Brian



Winnick, David


Straw, Jack
Wise, Audrey


Sutcliffe, Gerry
Worthington, Tony


Taylor, Mrs Ann (Dewsbury)
Wray, Jimmy


Taylor, Matthew (Truro)
Wright, Dr Tony


Thompson, Jack (Wansbeck)
Young, David (Bolton SE)


Timms, Stephen



Tipping, Paddy
Tellers for the Noes:


Turner, Dennis
Mr. John Cummings and Mrs. Barbara Roche.


Tyler, Paul

Question accordingly agreed to.

Bill accordingly read a Second time.

Ordered,
That—
(1) the following provisions be committed to a Committee of the whole House—

(a) Clauses 2, 5, 8, 15, 52, 64 and 91 and Schedules 1, 4, 11 and 14, and
(b) any new Clause first appearing on the Order Paper not later than 19th January and designed to continue the statutory effect of any of the Ways and Means Resolutions of the House of 13th December;
(2) the remainder of the Bill be committed to a Standing Committee;
(3) when the provisions of the Bill considered, respectively, by the Committee of the whole House and by the Standing Committee have been reported to the House, the Bill be proceeded with as if the Bill had been reported as a whole to the House from the Standing Committee.—[Sir George Young.]

Committee tomorrow.

Orders of the Day — Chechnya

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Chapman.]

Mr. Harold Elletson: I am grateful for the opportunity to raise tonight the subject of the United Kingdom's policy towards the crisis in Chechnya. I am also grateful to the Minister of State, my right hon. and learned Friend the Member for Grantham (Mr. Hogg), for agreeing to reply to the debate.
The war in Chechnya presents the international community with a number of serious problems. The ferocity of the Russian assault on the capital of Chechnya, Grozny, involving bombardment by air and by heavy artillery on the ground, is of a scale unparalleled, even in the conflict in the former Yugoslavia. We certainly cannot ignore it, nor can we ignore the potential for the conflict to spread across the Caucasus and beyond or the possible repercussions of the war in Moscow itself.
The war might be seen as yet another crisis in a far-off country of which the west knows nothing, but it is happening in a region that is every bit as complex, volatile and dangerous as the Balkans.
I think that I am possibly the only Member of Parliament to have visited Chechnya, which I did one long winter weekend a year ago. On that occasion, I met General Dudayev, the Chechen leader, and discussed his rather odd plans and ambitions with him. Although he clearly sees himself as a reincarnation of Shamyl, the tribal chief who harried Russian troops in Dagestan in the last century, he struck me as a dangerous, irresponsible fanatic who has the potential to destabilise the entire Caucasus and clearly intends to interfere in the domestic affairs of some of his neighbouring states.
He was clearly sponsoring and profiting from the growing worldwide activities of the Chechen mafia, and he was determined to forge alliances with Islamic fundamentalist regimes in other parts of the world. The week before my visit, he had been to see Saddam Hussein and, a few months earlier, he had met Colonel Gaddafi. He was also clearly disliked by a large percentage of the Chechen population, particularly by the ethnic Russian community, who were regularly harassed and attacked by his supporters.
However, none of that explains, excuses or mitigates the Russian Government's attempt to solve the problem by force. Russia's response has been unconstitutional and illegal. It has resulted in a barbaric and indiscriminate assault upon the civilian population of Chechnya. It has forced the Russian army—a conscript army of wretched, virtually unpaid recruits—to accept outrageously high casualties.
A friend in the Duma told me that the unofficial figure is 4,000 Russian military casualties. The Russian Government have succeeded in uniting the clans of Chechnya, and possibly of the whole north Caucasus, behind General Dudayev. It has been a repellent display of military blundering, political incompetence and old-style panzer communism.
The response of the international community has been curiously restrained and cautious. Perhaps the reason for that is a lack of understanding or knowledge of the


area. Perhaps it is because Governments see in this challenge to the territorial integrity of the Russian Federation the ghosts of 1991, when the west consented to the break-up of another sovereign, internationally recognised federal republic, Yugoslavia, despite the advice of our own envoy, Lord Carrington.
As I am sure the Minister will readily agree, there is a certain logical inconsistency in our willingness to accept the destruction of the Yugoslav federation and its replacement with artificial states whose borders were imposed by Tito, but to ignore the challenge to the territorial integrity of another federation, Russia, by an autonomous republic whose borders were imposed by Stalin.
I do not wish to dwell on the mistakes and tragedies of the past, but if we are to preserve anything from the ruins of the idea of a new world order, we should at least try to be consistent. I hope that our response to the Chechen crisis—which, although muted so far, is none the less the right one—will be maintained undiluted and clearly stated, along with our absolute condemnation of the methods that Russia has used.
I hope that the silence of the west when Russian tanks first moved into Chechnya did not result from a fear of upsetting President Yeltsin and provoking Russia into turning its back on the west. If that was the reason, it was based on a misunderstanding of the political situation in Russia and the probable effect of the Chechen crisis on it. We should understand that the most likely consequence of the war in Chechnya for the Russian political system could be a strengthening rather than a weakening of democratic institutions.

Mr. Nigel Evans: I receive many letters from my constituents about this matter, which is unusual, as it is a foreign affairs issue. They are deeply concerned by the scenes that they see on television, and by the bombing that is going on in Grozny in particular. Although they wish President Yeltsin well in the reforms that he is instituting in Russia, they wish to see a solution in Chechnya which does not involve the bombing of innocent women and children.

Mr. Elletson: My hon. Friend is absolutely right. I understand his constituents' concern. They are seeing some horrific atrocities, as are the Russian public for the first time, on their television screens. This war takes place against a background of struggle within the Russian Government—particularly in the President's own circle—between the various factions which are competing for succession.
Vested interests, such as the military-industrial complex and the so-called power Ministries of defence and security, have been jockeying for a greater hold on the levers of power. All the time, government has been increasingly concentrated in the hands of the President and his Security Council, while the state Duma—the Parliament—has little or no control. One of the consequences of the present crisis will be to create the political impulse for a more effective parliamentary system where the Executive is properly accountable.
We have misunderstood the Duma for too long, and seen it purely as a threat to President Yeltsin and his circle of reformers. Now it is the centre of activity for

those who protest against the war in Chechnya. Several Duma members—most notably Sergei Kovalyov, Russia's human rights commissioner—have shown great bravery by visiting Chechnya under fire in order to report on the appalling situation there. Yegor Gaidar, Duma member and former Prime Minister, has led the campaign against the war.
We need to support such people—to encourage them, and not to fear the consequences of being forthright in our criticism of President Yeltsin, however good a friend or democrat he may have been in the past. We will do Russia no favours if we assume that the war in Chechnya can be ignored and that Russia's relations with the west can remain unaffected by it.
Unfortunately, the first and most obvious consequence for our relations with Russia will inevitably be to call into question western aid and investment. That will happen, because the economic costs of the war will be enormous and probably sufficient to derail the Russian Government's budget this year.
Given the scale of western financial support, there are bound to be calls for a reappraisal unless the fighting ends soon. That will be very sad, and it is an issue that needs to be handled carefully, but unless the Russians adopt a more reasonable course of action, and unless Prime Minister Chernomyrdin commits his Government clearly and unambiguously to a ceasefire and peace negotiations, it will be unavoidable.
Sadder still will be the effect on Russia's position in the international community. The Chechen crisis cannot but have a effect on the negotiations about Russia's new relationship with the European Union, NATO, the Council of Europe, the International Monetary Fund and other international organisations.
All the good work that has been done over the past five years to draw Russia into the heart of Europe and to make her once again part of the international community of nations is now in jeopardy. If the position does not change soon and there is no serious attempt to abandon force in favour of negotiation, the west's response to Russia will have to be as firm as it was to China over Tiananmen square. That will be a sad day for all of us who believed in the new Russia and Boris Yeltsin.
What concerns me most about the crisis is the effect on the wider Transcaucasus. I do not know whether one of the motives for the Russian Government's actions was their concern to secure oil supply routes and facilities in Chechnya. The Russians take extremely seriously the potential for development of energy resources in and around the Caspian sea.
I visited the area on a number of occasions with BP Exploration, and I must declare an interest as an adviser to that company. The region's energy resources have stirred up an intense amount of feeling and disagreement in Russia, the Transcaucasus and central Asia. They have also been the cause of a serious disagreement between Britain and Russia over the status of the Caspian sea.
In Moscow, opinions on the issue are divided. There are those who see western involvement in the development of the energy resources of former Soviet republics as an unacceptable attempt by the west to steal oil and gas which is basically Russia's. Others feel that Russian industry will profit by the development of such a large market on its doorstep.
In any event, both groups understand the importance of secure transportation routes of energy from the region. Some people suggest that that is the real reason for the conflict in Chechnya, and that it is yet another war about oil. I do not believe that oil is anything other than an incidental and peripheral consideration for the Russian Government in the present fighting, but I am sure that it has been a motive for Russian actions in the region in the recent past. We must help to ensure that it does not become the cause of a much greater escalation of the conflict beyond Chechnya's borders. We must make absolutely clear our commitment to the independence and sovereignty of Azerbaijan, Armenia, Georgia and Kazakhstan. We must be vigilant in guarding against Russian interference, particularly in countries where there is a significant commercial interest. We should protest strongly at Russia's recent decision to seal the Azeri border, which is severely damaging Azerbaijan's economy.
We must point out that, although western companies are keen to co-operate with Russian business in the area, the confidence of international investors in possible pipeline routes through Grozny to the Russian Black sea has been severely damaged, together with investor confidence in Russia itself.
At the same time, we must commend countries bordering Chechnya for their responsible action in refraining from interfering in the conflict. We should recognise that now is the time to ensure a proper British presence in the region. There is already an embassy in Baku, but surely we should have full diplomatic representation also in Georgia and Armenia. A decision to open embassies there would further demonstrate at this important time our commitment to the independence of those states.
We ought to consider the effect of the Chechnya crisis on the region's other major security problem—the Nagorny Karabakh conflict. It is difficult to see how Russia could conceivably provide now the substantial troop contribution to the Organisation for Security and Co-operation in Europe peacekeeping operations in Nagorny Karabakh that was envisaged at the Budapest summit. However, it is vital not to lose the opportunity to establish a credible international peacekeeping operation in the region.
I hope that the Minister will ensure that Russia's difficulties do not jeopardise OSCE operations in Karabakh. Although I realise the extent of our other commitments, I urge my right hon. and learned Friend to consider with some of our allies the provision of logistic and other military support if that would help to ensure that the momentum of the peace process in Karabakh is not lost.
The war in Chechnya has exposed an extreme form of Russian nationalism. It has diminished Russia in the eyes of the world, shown the Russian army to be a paper tiger, and undermined Moscow's claim to he a credible force for stability in a volatile region—creating a dangerous vacuum that other powers may soon seek to fill.
These are troubled times. We must urge Russia back on to the proper path. We must seek calm and restraint from all those with an interest in the region. In that, Britain has an important role to play. I know that my right hon. and learned Friend will ensure that we do our part to bring peace and prosperity to the Caucasus.

The Minister of State, Foreign and Commonwealth Office (Mr. Douglas Hogg): I am grateful to my hon. Friend the Member for Blackpool, North (Mr. Elletson) for this timely opportunity to debate a topic of major concern to the international community. My hon. Friend's special knowledge of Russia and of the former Soviet Union makes him unusually well qualified to introduce this Adjournment debate.
The suffering in Chechnya is the latest tragedy in a list of events since the collapse of the former Soviet Union that includes other conflicts in the Caucasian region. The Chechens are proud of their warrior tradition. During the 19th century, there was frequent fighting between Russia and the tribesmen of the northern Caucasus. In 1859, Chechnya became part of the Russian empire, although that did not end the conflict.
Subsequently, Chechnya, together with the rest of the Russian empire, was incorporated into the Soviet Union. During the second world war, Stalin ordered the forced deportation of the Chechen people, and thousands died. The consequences of that act of barbarism are with us today.
Alone among the leaders of the Russian Federation, General Dudayev was unwilling to negotiate seriously with Moscow on the republic's status within the federation. In November 1991, the general unilaterally declared independence, which received no international recognition. I will say a few words about General Dudayev's regime, to which my hon. Friend specifically referred.
Clearly, General Dudayev is no democrat. He stamped out opposition and stifled freedom of speech. Under that regime, the economy collapsed and crime escalated. Between 100,000 and 150,000 non-Chechens fled the republic, and even some of his closest supporters turned against him. The threat to regional stability—already fragile—grew, and all attempts to negotiate foundered on the general's insistence on sovereignty. Fighting broke out between pro-Moscow opposition forces and those of Dudayev.
None of that justifies, as my hon. Friend has said, the suffering that is occurring, but it helps to explain why President Yeltsin decided to use force. He saw it as the only way in which to preserve the integrity of the federation. Now we watch with mounting distress as the modern army uses the immense firepower at its disposal against those who are its fellow citizens. Casualties, Chechen and Russian, run into thousands, and many are civilians. According to the UNHCR, an estimated 150,000 people have fled to neighbouring areas and, in addition, there are an estimated 260,000 displaced people in Chechnya itself.
In formulating our approach to this tragedy, we have to be clear about the status of Chechnya. Chechnya is part of the Russian Federation. That is the view of the British Government. That is the view of the international community. Against that background, we have identified three priorities.
First, the fighting must end as quickly as possible and with the minimum of civilian casualties. Secondly, immediate humanitarian relief must reach those in need. It is important that international agencies, especially the International Committee of the Red Cross, are involved


in that. Thirdly, no agreement will last unless it finds an effective way of enabling the Chechen people to express their identity within the framework of the constitution of the Russian Federation.
We have used every opportunity, here and in Moscow, to make our views known. In particular, my right hon. Friend the Foreign Secretary set out our views in a letter to Foreign Minister Kozyrev. He reinforced that on 10 January when Ambassador Adamishin was summoned to the Foreign Office.
In addition, we believe that the OSCE may have a special role to play in bringing the crisis to an end. We have urged that on the Russians bilaterally, and together with our European Union partners, in joint approaches to the Russian foreign ministry. The Russian reaction to a possible role for the OSCE has been positive, and we welcome that. For the Russians, the status of Chechnya is a matter of great importance. They emphasise that Chechnya is part of the Russian Federation and, as I have said, the international community accepts that fact.
But equally, in view of the commitments that Russia has made in the OSCE, what is happening in Chechnya is a matter of legitimate international concern. As the chairman of the Russian Parliament's foreign affairs committee said on 10 January:
The OSCE is insisting on sending in observers and I must say that under the agreement signed by us, it is fully entitled to do that.
The OSCE's involvement should be seen as co-operation. We look to Russia to live up to her OSCE commitments. It is in the interests of all that she should do so.
Some have seen the Russian action in Chechnya as a precursor of wider military action in the region and the resurgence of Russian imperialism. The British Government do not believe that that is the case. The Russian goals are to restore its authority in part of its own territory, and so far the fighting has remained in the confines of Chechnya. Indeed, there is no intrinsic reason why it should spread. We welcome the fact that, in neighbouring countries such as Azerbaijan and Georgia, to which my hon. Friend referred, where there has been internal strife, ceasefires are now in place, and the international community is actively engaged in helping to work out peaceful settlements.
The most pressing need, therefore, is for an end to the fighting, as my hon. Friend has said. The ceasefire announced last week failed to hold. To achieve one will doubtless be hard. Both sides are now heavily committed militarily. General Dudayev has so far shown no signs of compromising on his basic demand for sovereignty. In any case, his is not the only Chechen voice. We must continue in our attempts to persuade both sides that a long-term solution must come from negotiations that take their respective views into account.
There are signs that the Russians are developing their thinking on that. First Deputy Prime Minister Soskovets said on 14 January that, after the restoration of constitutional order in Chechnya, the new republican authorities will be exempted from fiscal obligations to the centre, and they will be granted autonomy in all fields except foreign affairs and defence.
The Russian Prime Minister, Chemomyrdin, has also begun a wide-ranging series of contacts with the leading members of the Chechen diaspora. Other senior figures are meeting clan leaders in Chechnya itself. The latest development, Prime Minister Chernomyrdin's call for immediate negotiations with a simultaneous ceasefire, is a further positive step. He envisages elections, followed by a discussion of Chechnya's status within the Federation. He has proposed that, before elections, there should be wide-ranging consultations on the formation of a transitional Government who would represent the interests of all Chechens. That appears to be a constructive approach, and we understand that Chechen negotiators have travelled to Moscow today. If that is true, it is welcome.
While fighting continues, we must try to ease suffering. Thousands need assistance. The international agencies are mobilising their resources. We welcome the fact that the Russians are allowing those agencies to act and have sought the help of the ICRC, the United Nations High Commissioner for Refugees, and the International Organisation for Migration.
We are actively involved in offering humanitarian assistance, and the European Union has already provided the ICRC with around £250,000 to pay for medicines and shelter. Further requests will doubtless come, and we stand ready to help if and when they do.
I refer now to our relations with Russia, an issue that was specifically referred to by my hon. Friend. Now is not the time for threats and sanctions. We have devoted much energy and resources over the past few years to encouraging the spread of democracy in Russia.
I have been struck by the freedom that the Russian people have exercised in criticising the decisions of their leaders. The media—written and broadcast—have brought home the true horror of this intervention, and the people have made their feelings quite plain. This is no Afghanistan, where events were shrouded in secrecy, and only a restricted and carefully controlled selection of information reached the public domain. Chechnya demonstrates that, in that respect at least, democracy is taking root in Russia.
The people regard their leaders as accountable. That is as it should be. We would regard any attempt to stifle that debate with the utmost concern. Vigorous democratic debate in Russia of the type that we are now seeing is helpful for us all.
The longer-term implications of the Chechnya crisis remain unclear. Despite much speculation, there does not so far appear to be an imminent threat to Russia's nascent democracy, but we must be alert. Damage has doubtless been done, and there is much uncertainty about the future.
Some liberal politicians in Moscow fear a return of authoritarian rule and Russia's international isolation. So far, events have not borne out those fears. Russia must live up to what is expected of a modern democratic state, and we look to her to do that. Our policies will take account of what happens within Russia, but now is not the time to exclude Russia from international organisations, or otherwise to heap penalties upon her.
To summarise, I record my gratitude to my hon. Friend; this is an important issue, as is marked by the fact that many hon. Members have attended the debate,


which itself is unusual in such a debate. We should, in substance, avoid hasty decisions. The priorities are and should remain to put an end to the fighting, to allow humanitarian relief, and to work for a political agreement which allows the Chechen people to express their identify within the Russian Federation. We must

encourage the Russians to allow the international community and, in particular, the OSCE to co-operate in the implementation of those objectives.

Question put and agreed to.

Adjourned accordingly at sixteen minutes to Eleven o'clock.